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v« 



CIVIL ASSET FORFEITURE REFORM ACT 

^^ Y 4. J 89/1:104/94 

Civil Asset Forfeiture Reforn Act,... 

HEARING 

BEFORE THE 

COMMITTEE ON THE JUDICIAKY 
HOUSE OP REPRESENTATIVES 

ONE HUNDRED FOURTH CONGRESS 

SECOND SESSION 
ON 

H.R. 1916 

CIVIL ASSET FORFEITURE REFORM ACT 



JULY 22, 1996 



Serial No. 94 







Printed for the use of the Committee on the Judiciary 



U.S. GOVERNMENT PRINTING OFFICE 
35-668 CC WASHINGTON : 1996 

For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-053850-5 



CIVIL ASSET FORFEITURE REFORM kCl 



v« 



Y 4. J 89/1:104/94 

Civil Asset Forfeiture Reforn Act,... 

HEARING 

BEFORE THE 

COMMITTEE ON THE JUDICIARY 
HOUSE OF REPRESENTATrVES 

ONE HUNDRED FOURTH CONGRESS 
SECOND SESSION 

ON 

H.R. 1916 

CIVIL ASSET FORFEITURE REFORM ACT 



JULY 22, 1996 



Serial No. 94 




''f 8 2 m? 



Printed for the use of the Committee on the Judiciary 



U.S. GOVERNMENT PRINTING OFFICE 
35-668 CC WASHINGTON : 1996 

For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-053850-5 



COMMITTEE ON THE JUDICIARY 



HENRY J. HYDE, Illinois, Chairman 



CARLOS J. MCX)RHEAD, California 
F. JAMES SENSENBRENNER, Jr.. 

Wisconsin 
BILL McCOLLUM, Florida 
GEORGE W. GEKAS, Pennsylvania 
HOWARD COBLE, North Carolina 
LAMAR SMITH, Texas 
STEVEN SCHIFF, New Mexico 
ELTON GALLEGLY, California 
CHARLES T. CANADY, Florida 
BOB INGLIS, South Carolina 
BOB GOODLATTE, Virginia 
STEPHEN E. BUYER, Indiana 
MARTIN R. HOKE, Ohio 
SONNY BONO, California 
FRED HEINEMAN, North Carolina 
ED BRYANT, Tennessee 
STEVE CHABOT, Ohio 
MICHAEL PATRICK FLANAGAN, Illinois 
BOB BARR, Geoi^a 



JOHN CONYERS, JR., Michigan 
PATRICIA SCHROEDER, Colorado 
BARNEY FRANK, Massachusette 
CHARLES E. SCHUMER, New York 
HOWARD L. BERMAN, California 
RICK BOUCHER, Virginia 
JOHN BRYANT, Texas 
JACK REED, Rhode Island 
JERROLD NADLER, New York 
ROBERT C. SCOTT, Virginia 
MELVIN L. WATT, North Carolina 
XAVIER BECERRA, Cahfomia 
ZOE LOFGREN, California 
SHEILA JACKSON LEE. Texas 
MAXINE WATERS, Cahfomia 



Alan F. Coffey, Jr., General Counsel/ Staff Director 
Julian Epstein, Minority Staff Director 



(II) 



CONTENTS 



HEARING DATE 



Page 

July 22, 1996 1 

TEXT OF BILL 

H.R. 1916 4 

OPENING STATEMENT 

Hyde, Hon. Henry J., a Representative in Congress from the State of Illinois, 
and chairman. Committee on the Judiciary 1 

WITNESSES 

Blanton, Jan P., Director, Executive Office for Asset Forfeiture, Department 

of the Treasury 237 

Cassella, Stefan D., Deputy Chief, Asset Forfeiture and Money Laundering 

Section, Criminal Division, Department of Justice 42 

Cutkomp, King 18 

Edwards, E.E. (Bo) III, Esq., on behalf of the National Association of Criminal 

Defense Lawyers 14, 278 

Komie, Stephen M., secretary, Illinois, State Bar Association 27 

Jones, Willie 12 

KappeUioff, Mark J., legislative counsel, on behalf of the American Civil 

Liberties Union 262 

McMahon, James, superintendent, New York State Police, on behalf of the 

International Association of Chiefs of Police 241 

Reed, Terrance G., chairperson, RICO, Forfieiture, and Civil Remedies Com- 
mittee, Section of Criminal Justice, on Behalf of the American Bar Associa- 
tion 256 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Blanton, Jan P., Director, Executive Office for Asset Forfeiture, Department 

of the Treasury: Prepared statement 239 

Cassella, Stefan D., Deputy Chief, Asset Forfeiture and Money Laundering 

Section, Criminal Division, Department of Justice: Prepared statement 215 

Cutkomp, King: 

Forfeiture bill and analysis 43 

Information concerning successful forfeiture challenges 248 

Edwards, E.E. (Bo) III, Esq., fiavid B. Smith, and Richard J. troberman, 
Cochairs, National Association of Criminal Defense Lawyers Asset Forfeit- 
ure Abuse Task Force, on behalf of the National Association of Criminal 
Defense Lawyers: Prepared statement 282 

Kappelhoff, Mark J., legislative counsel, on behalf of the American Civil 

Liberties Union: Prepared statement 265 

Komie, Stephen M., secretary, Illinois, State Bar Association: Prepared state- 
ment 33 

McMahon, James, superintendent, New York State Police, on behalf of the 

International Association of Chiefs of Police: Prepared statement 243 

Reed, Terrance G., chairperson, RICO, Forfeiture, and Civil Remedies Com- 
mittee, Section of Criminal Justice, on Behalf of the American Bar Associa- 
tion: Prepared statement 258 

(III) 



IV 

Pace 
AI'PENDIX 

Material submitted for the hearing 357 



CIVIL ASSET FORFEITURE REFORM ACT 



MONDAY, JULY 22, 1996 

House of Representatives, 
Committee on the Judiciary, 

Washington, DC. 
The committee met, pursuant to notice, at 9:40 a.m., in room 
2141, Rayburn House Ofifice Building, Hon. Henry J. Hyde (chair- 
man of the committee) presiding. 

Present: Representatives Henry J. Hyde, Greorge W. Grekas, Car- 
los J. Moorhead, Bob Barr, and Barney Frank. 

Also present: Alan F. Coffey, Jr., general counsel/staff director; 
Diana Schacht, deputy general counsel; Kenneth Prater, clerk; 
Stephanie Peters, minority counsel; and Melanie Sloan, minority 
counsel. 

OPENING STATEMENT OF CHAIRMAN HYDE 

Mr. Hyde. The committee will come to order. 

Under our rules, it is permissible for purposes of hearings to pro- 
ceed with less than a full complement, and while today is Monday 
morning and the House doesn't go into session until sometime later 
and votes later this afternoon, it is understandable that a lot of 
Members aren't present. But frankly, this subject is an important 
one, and because of the press of other calendar matters, we haven't 
gotten to it this year until this morning. And I am loath to forgo 
the opportunity to advance this legislation. So we are going to pro- 
ceed with it, but I apologize for the paucity of Members, and I con- 
gratulate my friend George Gekas for his being here. 

Mr. Gekas. Thank you, Mr. Chairman. 

Mr. Hyde. The gentleman from Pennsylvania. 

Mr. Gekas. Yes. I am eager to listen to the witnesses and to per- 
haps engage in a colloquy with one or more of them on this, like 
you say, important subject. 

I just wanted to lay a little background on the basis that this 
committee in the early 1980's, in furtherance of then President 
Reagan and then President Bush, and even more recently under 
President Clinton, we were considering this subject matter in one 
form or another. As a matter of fact, all the comprehensive crime 
plans which we have either contemplated or adopted in one way or 
another touched upon this subject, and I must say that you cannot 
have a comprehensive crime program unless you include forfeiture 
as one of the matters which you must consider thoroughly. 

I am eager to see where we have failed, where we can improve, 
what it really means to law enforcement, and, therefore, I join with 

(1) 



the chairman in moving ahead to make a record on this very im- 
portant subject. 

Thank you, Mr. Chairman. 

Mr. Hyde. I thank the gentleman. Those people in the room who 
are in the Navy will recognize the phrase, "now hear this." 

Well, now hear this: Federal and State officials have the power 
to seize your home, your car, your business and your bank account, 
all without indictment, hearing or trial. Regardless of sex, age, race 
or economic status, we are all potential victims of civil asset forfeit- 
ure procedures. 

Just ask Willie Jones, owner of a Nashville landscaping business. 
In 1991, he made the mistake of paying for an airplane ticket in 
cash — behavior that was deemed to fit a drug courier profile. Mr. 
Jones was detained. His luggage was searched. No drugs were 
found, but his wallet contained $9,600 in cash. The money was 
seized, but Mr. Jones was not charged with any crime. After 2 
years of legal wrangling, his money was finally returned. 

In 1989, during a fruitless 7-hour search for drugs aboard Craig 
Kline's $24,000 new sailboat. Federal agents wielding axes, power 
drills and crowbars nearly destroyed the boat. No evidence of con- 
traband was found. The boat was sold for scrap, and only after 
Congress intervened did Mr. Kline receive a reimbursement of 
$9,100, a third of the boat's value. 

Over the course of several years, Florida police routinely con- 
fiscated cash, an estimated $8 million total, from hundreds of mo- 
torists who supposedly fit profiles of drug couriers. Criminal 
charges were rarely filed in these cases, and only in three instances 
did the individuals successfully have funds returned. 

According to one estimate, in more than 80 percent of civil asset 
forfeiture cases, the property owner is not charged with a crime. 
Nevertheless, Government officials usually keep the seized prop- 
erty. Furthermore, to justify its seizure, the Government need only 
present evidence of what its agents see as "probable cause." That 
is the same standard required to obtain a search warrant, but in 
that situation, police are permitted to seek evidence of a crime, not 
to permanently take somebody's property. Even worse, under 
present law, the burden of proof is on the property owner, who 
must establish by a preponderance of the evidence that his or her 
property has not been used in a criminal act or not otherwise for- 
feitable. The uncharged victim must prove the negative. 

The basic presumption in American law, you are innocent until 
proven guilty, has been turned on its head. Property owners who 
lease their apartments, cars or boats risk losing their property be- 
cause of renters' conduct, conduct over which the actual owner has 
no control. 

To contest Government forfeiture, owners are allowed only a few 
days within which to file a claim and post a 10-percent cash bond 
based on the value of the property. Even if the owner is successful 
in getting the property returned, the government is not liable for 
any damage to the property which occurs while in the Govern- 
ment's possession. 

In 1992, former New York City Police Commissioner Patrick 
Murphy observed that the large monetary value of forfeitures has 



created a great temptation for State and local police departments 
to target assets rather than criminal activity. 

Now, let me stress, I view criminal asset forfeiture following a 
criminal conviction as an appropriate punishment. There, the 
guilty party has been accorded due process of law. But civil asset 
forfeiture all too often punishes innocent persons. These procedures 
may have made sense in the 18th century, when ships containing 
contraband or smuggled goods were seized, but in today's modern 
world, the targets of noncriminal forfeiture are residences, busi- 
nesses and bank accounts. We need to reform these procedures so 
as to ensure fundamental fairness and due process rights. 

For these reasons, I have introduced the Civil Asset Forfeiture 
Reform Act, H.R. 1916. First and foremost, this legislation revives 
the notion that property, like individuals charged with crimes, is 
innocent until proven guilty. It allows property owners to recover 
for the damage done to property while in the custody of law en- 
forcement agencies and protects innocent property owners, such as 
landlords, who are unaware of illegal activity. Further, the bill 
would eliminate the regressive cash bond now required of property 
owners who file an appeal in a seizure case and would extend the 
period of time for appeal of a seizure from the current 10 or 20 
days to a more reasonable 30 days. 

The fifth amendment to our Constitution reads: "No person shall 
be deprived of life, liberty, or property, without due process of law; 
nor shall private property be taken for public use without just com- 
pensation." 

Today this committee embarks on a path of reform that hopefully 
will comport Federal civil asset forfeiture law with the true spirit 
of the fifth amendment. 

[The bill, H.R. 1916, follows;] 



104TII ('()N(}RKSS 
1st Skssion 



H.R.1916 



To ivfonii cntaiii statutes irfranliii": n\i\ assi't foifi-ituiv. 



IN THE HOUSE OF REPllESENTATR^S 

.Jink 22. 1995 
Ml-. IIydk iiitHKhu'cd tlu' t()ll()\viii<r l)ill; wliicli was rofonod to the (\)inmittoe 
on tlic* Jiuiiciary, and in addition to the ("oniinittee on Ways and .Moans, 
for a |H'i-iod to Ik- sul>se<]utMitly detorniined l)y tlio Speaker, in eaeli ease 
for eonsideration of sueh provisions as fall witliin the jurisdietion of the 
eoinmittee eoneerned 



A BILL 

To reform certain statutes regarding: ei\il asset forfeiture. 

1 Be it enacted by the Senate and House of Representa- 

2 tives of the United States ofAmenca in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the "Ci\'il Asset Forfeiture 

5 Reform Act". 

6 SEC. 2. LIMITATION OF CUSTOMS AND TAX EXEMPTION 

7 UNDER THE TORT CLAIMS PROCEDURES. 

8 Section 2()80(c) of title 28, United States Code, is 

9 amended — 



2 

1 (1) l)v strikiiifj: "law-oiitbreeniLMit" and inserting: 

2 "law enforcement"; and 

3 (2) by insertinjif before tlie period the following: 

4 ", except that the pro\'isi()ns of this chapter and sec- 

5 tion 134()(l)) of this title shall apply to any claim 

6 based on the negligent destruction, injury, or loss of 

7 goods 01- merchandise (including real property) while 

8 in the possession of any officer of customs or excise 

9 or any other law enforcement officer". 

10 SEC. 3. LONGER PERIOD FOR FILING CLAIMS IN CERTAIN 

1 1 IN REM PROCEEDINGS. 

12 Paragi-aph (6) of Ride C of the Supplemental Rules 

1 3 for Certain Admiralty and Maritime Claims to the Federal 

14 Rules of Ci\il Procedure (28 U.S.C. Appendix) is amended 

15 by striking "10 days" and inserting "30 days". 

16 SEC. 4. BURDEN OF PROOF IN FORFEITURE PROCEEDINGS. 

17 Section 615 of the Tariff Act of 1930 (19 U.S.C. 

18 1615) is amended to read as follows: 

19 "SEC. 615. BURDEN OF PROOF IN FORFEITURE PROCEED- 

20 INGS. 

21 -In— 

22 "(1) all suits or actions (other than those aris- 

23 ing under section 592) brought for the forfeiture of 

24 any vessel, vehicle, aircraft, merchandise, oi- baggage 



•HR 1916 IH 



3 

1 seized uiuler the provisions of any law relatin«r to the 

2 eollection ot* duties on inipoits or tonna{»XN «n»d 

3 "(2) in all suits or actions l)rou{i:ht for the re- 

4 eoveiy of the value of any vessel, vehicle, aircraft, 

5 tnei'chandise, or bajrjTti^, because of \iolation of any 

6 such law; 

7 the burden of pn)of is on the United States Government 

8 to establish, by clear and coiunncing e\idence, that the 

9 property was subject to forfeiture.". 

10 SEC. 5. CLAIM AFTER SEIZURE. 

11 Section 608 of the Tariff Act of 1930 (19 U.S.C. 

12 1608) is amended to read as follows: 

1 3 -^EC. 608. SEIZURE; CLAIMS; REPRESENTATION. 

14 "(a) In GeneRiVL. — ^Any person claiming such vessel, 

1 5 vehicle, aircraft, mei-chandise, or baggage may at any time 

16 within 30 days from the date of the first publication of 

17 the notice of seizure file with the appropriate customs offi- 

18 cer a claim stating his interest therein. Upon the filing 

19 of such claim, the customs officer shall transmit such 

20 claim, with a duplicate list and description of the articles 

21 seized, to the United States attorney for the district in 

22 which seizure was made, who shall proceed to a condemna- 

23 tion of the merchandise or other property in the manner 

24 prescribed by law. 



•HR 1916 IH 



4 

1 "(b) OouuT-AproiNTEi) Rkpkksentation. — If the 

2 person t'lliiifr a claim under subsection (a), or a claim re- 

3 jrardinfr seized property under any other prox-ision of law 

4 that incorporates by reference the seizure, fort'eiture, and 

5 condemnation procedures of the customs laws, is tlnan- 

6 cially unable to obtain representation of counsel, the court 

7 may appoint appropriate counsel to represent that person 

8 with respect to the claim. The court shall set the eom- 

9 pensation for that representation, which shall — 

10 "(1) be equivalent to that provided for court-ap- 

1 1 pointed i-epresentation under section 3006A of title 

12 18, United States Code, and 

13 "(2) be paid from the Justice Assets Forfeiture 

14 Fund established under section 524 of title 28, Unit- 

15 ed States Code.". 

16 SEC. 6. RELEASE OF SEIZED PROPERTY FOR SUBSTANTIAL 

17 HARDSHIP. 

18 Section 614 of the Tariff Act of 1930 (19 U.S.C. 

19 1614) is amended — 

20 (1) by inserting before the first word in the sec- 

21 tion the follo\ving: "(a) Release Upon Pay- 

22 .ME NT. — "; and 

23 (2) by adding; at the end the follo\ving: 

24 "(b) Release of Seized Property for Substax- 

25 tlvl Hardship. — 

•HR 1916 IH 



8 



1 "(1) RlOQlKST Fou KKI.KASK. — A claimant is 

2 entitled to innnediute ivlease of seized |)ro|)eity if 

3 eoiitinued possession by the United States (iovern- 

4 nient would cause the claimant substantial hardship, 

5 such as pieventin«>: the functioninjj: of a business, 

6 preventinjr an individual from \vorkin<r, or lea\'ing: an 

7 indixidual homeless. A claimant seeking: release of 

8 property under this subsection nuist request posses- 

9 sion of the propeity from the appropriate customs 

10 officer, and the request must set forth the basis 

1 1 therefor. If within 10 daj'S after the date of the re- 

12 quest the property has not been released, the elaim- 

13 ant may file a complaint in any district court that 

14 would have jurisdiction of forfeiture proceedings re- 

15 lating to the property setting forth — 

16 "(xV) the nature of the claim to the seized 

17 property; 

18 "(B) the reason why the continued posses- 

19 sion by the United States Government pending 

20 the tinal disposition of forfeiture proceedings 

21 will cause substantial hardship to the claimant; 

22 and 

23 "(C) the steps the claimant has taken to 

24 secure release of the property from the appro- 

25 priate customs officer. 

•HR 1916 IH 



1 "(2) Rktikx of i'HOl'KHTY. — If a coinplaiiit is 

2 filed under purajn'Hph (1), the district court shall 

3 oi'der that the piopeitv be retui'iied to the chiiinaut, 

4 peu(hM<i: completion of pr()ceedin«»-s by the United 

5 States Government to obtain forfeiture of the prop- 

6 crty, if the claimant shows that — 

7 "(A) the claimant is likely to demonstrate 

8 a possessoiy interest in the seized property; and 

9 "(B) continued possession by the United 

10 States Government of the seized property is 

1 1 likely to cause substantial hardship to the 

12 claimant. 

13 The court may place such conditions on release of 

14 the property as it finds are appropriate to preserve 

15 the availability of the property or its equivalent for 

1 6 forfeiture. 

17 "(3) Time for decision. — The district court 

18 shall render a decision on a complaint filed under 

19 paragraph (2) no later than 30 days after the date 

20 of the filing, unless such 30-day hmitation is ex- 

21 tended by consent of the parties or by the court for 

22 o:ood cause shown.". 

23 SEC. 7. JUSTICE ASSETS FORFEITURE FUND. 

24 Section 524(c) of title 28, United States Code, is 

25 amended — 

•HR 1916 IH 



10 



7 

1 (1) by strikiiifj: out "law oiiforccnioiit piir- 

2 poses — " ill the matter |)reee(liii«r subparajnapli (A) 

3 ill para<irapli (1) and iiisertiiiji: ''purposes — "; 

4 (2) by redesifrnatiiifi- the final '.i subparajiraplis 

5 ill parajiraph (1) as subparajiraplis (I), (J), and (K), 

6 respeetively; 

7 ('.]) by iiisertinji' aftei- subpara«r>'5ipli (G) of 

8 paraji^-apli (1) tlie tbllo\vin«r new subparajri'aph: 

9 "(II) payment of eouit-awarded compensation 

10 for repi-esentation of elaimauts pursuant to section 

1 1 ()()S(b) of the Tariff Act of 1930;"; and 

12 (4) by strikino; out "(H)" in subparagfi-aph (A) 

13 of parajn'aph (9) and inseiting: "(I)". 

1 4 SEC. 8. CLARIFICATION REGARDING FORFEITURES UNDER 

15 THE CONTROLLED SUBSTANCES ACT. 

16 (a) In Gexkilvl. — ^Section 511(a) of the Controlled 

17 Substances Act (21 U.S.C. 881(a)) is amended— 

18 (1) in paragraph (4)(C), by striking- "without 

19 the knowledge, consent, or willful blindness of the 

20 owner." and inserting "either wthout the knowledge 

21 of that owner or without the consent of that owner." 

22 (2) in eacii of paragraphs (6) and (7), by strik- 

23 ing "without the knowledge or consent of that 

24 owner." and insertiim- "either witiiout the knowiedge 



•HR 1916 IH 



11 



8 

1 of that owner oi- without the consent of tliat 

2 owner.". 

3 (h) Sl'KCIAL RlLK. — 

4 (1) (ilOXKHALLY. — Section 511 of tlie Con- 

5 tiolled Substances Act (21 U.S.C^ 881) is amended 

6 by ad(Hnj>' at the end the followin":: 

7 "(1) l^^or the purposes of this section, property shall 

8 not he considered to have been used for a proscribed use 

9 witiiout the knowledge? or without the consent of the owner 

10 of an interest in that property, if that owner was wilfully 

1 1 blind to, or has failed to take reasonable steps to prevent, 

12 the proscribed use.". 

13 (2) CoXFOinilNCJ TEdlXIC.VI. .UlEXDMENT. — 

14 The subsection (1) of section 511 that relates to an 

15 agi'eement between the Attorney General and the 

16 Postal Senice is redesignated as subsection (k). 

17 SEC. 9. APPLICABILITY. 

1 8 The amendments made by this Act apply Avith respect 

19 to claims, suits, and actions filed on or after the date of 

20 the enactment of this Act. 

O 



•HR 1916 IH 



12 

Mr. Hyde. This morning, we will be^n with testimony about per- 
sonal experiences with civil asset forfeiture. First, Mr. Willie Jones, 
a landscaper from Nashville, TN, will talk about his several-year 
struggle to get the Drug Enforcement Administration to return 
money they had seized from him simply because he met a drug 
courier profile. 

Second, we will hear from Mr. King Cutkomp of Rock Island, IL, 
who will tell the story of his mother's experience of civil asset for- 
feiture. 

And finally, on the first panel, Stephen Komie, secretary of the 
Illinois State Bar Association, is here to describe the cases of sev- 
eral of his clients who have been caught up in civil asset forfeiture. 

Would Mr. Komie, Mr. Cutkomp and Mr. Jones come to the 
table. 

Good morning, Mr. Jones. If you don't mind, I would like to start 
out with you. If you would tell us your story about your encounter 
with this issue, we would appreciate it. 

Mr. Jones. Good morning. 

Mr. Hyde. Would you help with the microphone. If you just push 
that little lever and pull that close to you. Very well. Thank you, 
Mr. Jones. 

Would you please state your name and where you live. 

Mr. Jones. My name is Willie Jones. I live in Nashville, Ten- 
nessee. 

Mr. Hyde. Very well, sir. Would you tell us your story involving 
asset forfeiture. 

STATEMENT OF WHXIE JONES 

Mr. Jones. Yes. On February 27, 1991, I went to the Metro Air- 
port to board a plane for Houston, TX, to buy nursery stock. I was 
stopped in the airport after paying cash for my ticket. 

Mr. Hyde. What business are you engaged in or were you en- 
gaged in? 

Mr. Jones. I am engaged in landscaping. 

Mr. Hyde. Landscaping. You were on your way to buy some 
nursery stock? 

Mr. Jones. That's correct. 

Mr. Hyde. All right, sir. So you arrived at the airport. Then what 
happened? 

Mr. Jones. I paid cash for a round-trip ticket to Houston, TX, 
and I was detained at the ticket agent. The lady said no one ever 
paid cash for a ticket. And as I went to the gate, which was gate 
6, to board the plane, at that time three officers came up to me and 
called me by my name, and asked if they could have a word with 
me, and told me that they had reason to believe that I was carrying 
currency, had a large amount of currency, drugs. So at that 
time 

Mr. Hyde. Proceeds of a drug transaction; you had money that 
was drug money then, that's what they charged you with? 

Mr. Jones. Yes, sir. 

Mr. Hyde. Were you carrying a large amount of cash? 

Mr. Jones. Yes, sir. I had $9,000. 

Mr. Hyde. $9,000 in cash. Why was that, sir? Was your business 
a cash business? 



13 

Mr. Jones, Well, it was going to be if I had found the shrubbery 
that I liked, by me being — going out of town, and the nursery busi- 
ness is kind of like the cattle business. You can always do better 
with cash money. 

Mr. Hyde. They would rather be paid in cash than a check, espe- 
cially since you are from out of town? 

Mr. Jones. That is correct. 

Mr. Hyde. All right. So you had $9,000 in cash, and these three 
officers have gotten you off to the side, and they had suggested that 
this money was drug money; is that right? 

Mr. Jones. That is correct. 

Mr. Hyde, Then what happened? 

Mr. Jones. Well, at that time, they took the money and they 
asked me to go with them, and I questioned them about going 
where. And they said — they told me not to worry about that, just 
come on, let's go. 

Mr. Hyde. Did you tell them what you were about, where you 
were going and for what purpose? 

Mr. Jones. I did. I also presented them with a business card. At 
that time, I was carrying a checkbook with my name and my busi- 
ness name. 

Mr. Hyde. What police were these; do you remember? With what 
force were they associated? 

Mr. Jones. It was DEA. 

Mr. Hyde. Drug Enforcement Administration people? 

Mr. Jones. Yes, sir, 

Mr. Hyde. OK. Then what happened? 

Mr. Jones. So we proceeded to go out of the airport, which they 
had a little building out across the terminal. We went there. And 
at that time, I was questioned about had I ever been involved in 
any drug-related activity, and I told them, no, I had not. 

So they told me I might as well tell the truth because they was 
going to find out anyway. So they ran it through on the computer 
after I presented my driver's license to them, which everything 
was — I had — it was all in my name. And he ran it through the com- 
puter, and one officer told the other one, saying, he is clean. But 
instead, they said that the dogs hit on the money. So they told me 
at that time they was going to confiscate the money. 

Mr. Hyde. They determined from the dog's activities that there 
were traces of drugs on the money? 

Mr. Jones. That is what they said. 

Mr, Hyde. That is what they claimed? 

Mr. Jones. Yes, sir. 

Mr. Hyde. Therefore, they kept the money? 

Mr. Jones. They did keep the money. 

Mr. Hyde. Did they let you go? 

Mr. Jones. They did let me go. 

Mr. Hyde. Were you charged with anything? 

Mr. Jones. No. I asked them to, if they would, if they would 
count the money and give me a receipt for it. They refused to count 
the money, and they took the money and told me that I was free 
to go, that I could still go on to Texas if I wanted to; that the plane 
had not left. 



14 

Mr. Hyde. Of course, your money was gone. You had no point in 
going to Texas if you can't buy shrubs. 

Mr. Jones. No. 

Mr. Hyde. So did you ever get your money back? 

Mr. Jones. I finally got my money back 2V2 years — some 2V2 
years later. 

Mr. Hyde. How did that happen? 

Mr. Jones. But at the same time, I left the — after they told me 
I was free to go, I left the airport, and I rode down the interstate 
for a while, and I got to thinking about what had happened, and 
I turned and went back to the airport because it just didn't sound 
right and didn't feel right. 

I went back to the airport, and at this time they told me that 
I was one of the few to — that they had taken as much as $100,000 
off of people and had let them go, and that they — that was the last 
place that they wanted to come back to. And I told them, I said, 
well, I don't really have anything to hide or anything to cover up, 
so I went back, and they told me at that time, again, I was defi- 
nitely not going to get my money back, and they was not going to 
arrest me. 

Mr. Hyde. So how did you get your money back? 

Mr. Jones. Well, at that time I contacted my attorney, which is 
here, Mr. Edwards, and we started working on the case, because 
we had to actually sue the Government to 

Mr. Hyde. Return your money? 

Mr. Jones [continuing]. Get my money returned. 

Mr. Hyde. So you filed a lawsuit; is that correct? 

Mr. Jones. That is correct. 

Mr. Hyde. And after 2 years, you got your money back? 

Mr. Jones. Yes. 

Mr. Hyde. Was that by court order? 

Mr. Jones. That was by court order. 

Mr. Hyde. Did you get any interest on the money? 

Mr. Jones. No. 

Mr. Hyde. So you lost 2 years of interest, plus the use of the 
funds, plus you had to hire an attorney and file a lawsuit. 

Mr. Jones. That is correct. 

Mr. Hyde. Is there anything that you wish to add to this, other 
than what you have told us? 

Mr. Jones. Not really, I guess other than how easy it is an inno- 
cent person can get caught up into something like this. I was not 
aware at that particular time that we was going to have to go 
through all the different things we had to go through to just get 
the money back. 

Mr. Hyde. Would you identify your attorney, or would you iden- 
tify yourself, sir? Do you have anything to add, counsel? Congratu- 
lations on getting Mr. Jones' money back. 

STATEMENT OF E.E. (BO) EDWARDS HI, ESQ. 

Mr. Edwards. Thank you, Mr. Chairman. I am E.E. Edwards, 
better known as Bo Edwards. I am from Nashville and over the 
last several years have represented numerous people who have had 
the misfortune of having property seized. Mr. Jones, I would say. 



15 

is probably by far the most famous, perhaps because his case is 
sort of a potpourri of the abuses and the injustices of forfeiture. 

The reason, Mr. Chairman, that Mr. Jones had to sue the Gov- 
ernment to get his money back was because when he came to see 
me 2 days after the money was taken, I explained to him that in 
order to get into court he was going to have to post a bond, and 
the bond would be $9,000, 10 percent of what they took from him. 
And he said well, they took all my money. I don't have $9,000. 

Mr. Hyde. You mean $900? 

Mr. Edwards. I am sorry. $900, that's right. He said he didn't 
have $900 left. They took all his money. Essentially, they took all 
his working capital. 

We filed affidavits. In fact, asked the Asset Forfeiture Office on 
two or three occasions to waive the bond requirement, and they 
consistently refused. So finally, he was faced with a choice of either 
giving up or doing what we did. And perhaps because Mr. Jones 
is a good man and a nice man and his lawyer was a little stubborn, 
we decided to sue the Government. But, in fact, the Government 
probably spent over $300,000 trying to avoid admitting that they 
were wrong in taking Willie Jones' $9,000. 

Mr. Hyde. Well, tell me about your litigation. What kind of a 
suit did you file? 

Mr. Edwards. We filed a civil rights action under section 1983 
against the three officers who seized his money. And incidentally, 
although they were operating under the leadership direction of the 
DEA, they were actually local officers. The DEA in Nashville, as 
occurs all over the country, had formed a joint task force by con- 
tract. We actually obtained a copy of the contract and put it into 
evidence in his trial, whereby the Metropolitan Police Force of 
Nashville provided a certain number of officers. The Air Force — I 
am sorry. The airport police department provided a certain number 
of officers, and the DEA provided one agent to supervise. And that 
is how this interdiction unit at the Nashville airport was composed. 

The three officers we sued consisted of one Metro Nashville Po- 
lice sergeant, who was on leave from the drug squad to this inter- 
diction unit, and two airport officers. And we sued the three of 
them. We could not ask for damages — or at least we made the deci- 
sion not to, because of the doctrine of qualified immunity. Had we 
asked for damages against the officers for taking — for stopping Mr. 
Jones and taking his money, the lawsuit instead of taking 2 years 
probably would have taken 3 or 4, and we would have run the risk 
that the case would have been dismissed on the basis of immunity. 
But because we asked only for his money back, they could not use 
qualified immunity as a defense. 

The first — there were actually two trials, Mr. Chairman. The 
first trial was in response to the government's position that a U.S. 
district court could not review the decision of the Asset Forfeiture 
Office of the Justice Department in refusing to waive Mr. Jones' 
bond. In other words, they wouldn't let him into court, and their 
position was a district — a U.S. district judge couldn't pass judg- 
ment on their decision. 

Mr. Hyde. And because your client didn't have the $900 to post 
a bond, you couldn't proceed under the asset forfeiture process? 
You had to file a civil rights suit? 



16 

Mr. Edwards. That's exactly right. We couldn't afford to pay our 
way into court, so we couldn't get a day in court for Willie Jones 
without suing the Grovernment because they wouldn't waive the 
bond requirement. 

Mr. Hyde. The U.S. Attorney's Office defended this lawsuit? 

Mr. Edwards. Yes, sir. 

Mr. Hyde. And they persisted in withholding Mr. Jones' money? 

Mr. Edwards. Well, that is a very interesting question, Mr. 
Chairman. A few weeks after we filed the lawsuit under section 
1983 as a civil rights case on behalf of Mr. Jones, I had a con- 
ference with an assistant U.S. attorney in Nashville, and we talked 
about the case, and I explained just how clean Mr. Jones was and 
just how egregious the seizure of his money was, and the AUSA 
thought that it would make a lot of sense, if we were willing, to 
rethink refusing to waive his bond. And I told him that we would 
agree to drop the civil rights case if the Government would agree 
to waive the bond and let us go back into the normal forfeiture 
process and get a trial under the court's jurisdiction to hear forfeit- 
ure cases. 

So we had a private agreement to do that, but he had to talk to 
main Justice before we could solidify that understanding, and he 
came back to me a few days later and said, main Justice wouldn't 
go along with that. 

Mr. Hyde. What year was this? 

Mr. Edwards. This was in 1991. The lawsuit was filed, I believe, 
1 or 2 days before the Fourth of July of that year. The seizure, of 
course, was on February 27, earlier in that year. 

Mr. Hyde. Did you deal with the Department of Justice other 
than the U.S. attorney there? 

Mr. Edwards. No, sir. I did not deal directly with anyone in 
Main Justice. 

Mr. Hyde. You don't know who was responsible for making that 
decision? 

Mr. Edwards. No, I am afraid I don't. 

Mr. Hyde. What enlightened member of the Justice Department? 

Mr. Edwards. Yes, sir. 

Mr. Hyde. All right. So you proceed with the civil rights lawsuit. 
Did you go to trial? 

Mr. Edwards. The first trial resulted in the district judge, Thom- 
as Wiseman, holding that the Asset Forfeiture Office had acted in 
bad faith in refusing to waive the bond, and he ordered the bond 
waived and ordered an immediate trial with respect to the seizure. 

The Government asked for more time and after some argument 
was granted additional time, and we finally had a trial, as I recall, 
in late 1992. During that trial, the Government was fiying DEA 
agents from Nashville to Houston and Houston agents from Hous- 
ton to Nashville. I mean, it may very well be a modest conservative 
estimate when I say the Government spent over $300,000 trying to 
defend this seizure. But at any rate, I think it is certainly fair to 
say that the Government did everything that they could think of 
to try to prove that Willie Jones was a drug dealer. But they were 
facing an insurmountable problem: The truth, because he wasn't 
and never has been. 



17 

So ultimately, the judge held that the stop of Mr. Jones in the 
airport was in violation of his fourth amendment rights; that the 
money should never have been seized long before the dog sniff oc- 
curred. 

He further found, based on documents that I was able to obtain 
showing that DEA lab technicians had long — had much earlier ad- 
vised against using dog sniffs to establish proof with respect to cur- 
rency, because the American money supply is so tainted with trace 
cocaine, he decided that and held that there was no basis for the 
seizure; there was no basis for a forfeiture, and he ordered the Gov- 
ernment to return Mr. Jones' money. 

Mr. Hyde. Why didn't he get interest back? 

Mr. Edwards. Because of the same problem. We were concerned 
about giving the Government an opportunity to raise the issue of 
qualified immunity. 

Mr. Hyde. To escape altogether, yes. 

Mr. Edwards. There have been some decisions in Federal court 
since Mr. Jones' case has ended that suggested — or that suggest 
that perhaps he would have been entitled to obtain interest on his 
money had we pressed that issue. 

Mr. Hyde. How about your attorney's fees, did they get allowed, 
or did Mr. Jones have to pay those? 

Mr. Edwards. Well, that is very interesting. Had the Govern- 
ment waived the $900 bond requirement and let Mr. Jones have 
his day in court, I would have not been entitled to attorney's fees, 
and Mr. Jones would have had to pay whatever fee I got paid out 
of the money he got back. But because they refused to do that and 
were acting in bad faith in refusing, that left us with the only al- 
ternative of suing under the civil rights statute. By virtue of pre- 
vailing as a plaintiff in a civil rights case, I was entitled to an 
award of attorney's fees. So I was ultimately paid in the neighbor- 
hood of $80 to $85,000 — I don't remember the exact amount — for 
the work I did over 2V2 years representing Mr. Jones. 

Had the Government waived the bond, I would have been paid 
nothing, and Mr. Jones would have been stuck with the fee, which 
is another reason that forfeiture can be so unjust. A reasonable at- 
torney's fee, even in a modest, simple forfeiture case in Federal 
court, is going to cost $20,000, $25,000, $30,000 in legal fees just 
because of the time and attorney effort required. So when the 
amount seized is a relatively modest sum, the property owner is 
going to lose anyway, no matter what he does. 

Mr. Hyde. Wouldn't you think somebody along the chain of com- 
mand from the U.S. Attorney's Office in Nashville up to the Justice 
Department would have the common sense to look at this and to 
cut their losses and do a little justice for Mr. Jones? Does it boggle 
your mind, as it does mine, that the bureaucracy refuses to give an 
inch on something like this that is so blatant and egregious? 

Mr. Edwards. Mr. Chairman, it makes me sad that my Govern- 
ment acts that way. I didn't grow up believing in the kind of Gov- 
ernment that I have seen exemplified in Mr. Jones' case or many 
other cases. And money — the desire to get this property is what 
causes it, I believe. 



18 

Mr. Hyde. I think that there is a whole field of inquiry of the 
Federal Government suing people on suits that are baseless that 
someday needs a real inquiry, but this is surely one. 

Well, I congratulate you, sir. You are what a lawyer should be, 
persistent and tough, and Mr. Jones is a smart man in picking you 
for a lawyer. 

Now, I notice you are on the panel, the third panel. Do you have 
more to say then? 

Mr. Edwards. Well, Mr. Chairman, I think my position on the 
third panel is more with respect to the broader picture. 

Mr. Hyde. Very well. 

Mr. Edwards. And to the provisions in your bill itself because I 
have been very active over the last several years in promoting your 
cause, the cause of forfeiture reform. 

Mr. Hyde. Thank you. 

Mr. Edwards. But let me say thank you so much for your kind 
words. But without the very courageous and bold position, public 
position you have taken, I fear that many more Americans would 
be subjected to the same kind of injustices, and America should be 
very proud and very thankful for the work that you have done in 
calling the country's attention to these injustices. 

Mr. Hyde. You are very kind, and I accept that for lots of people 
who are interested; Mr. Frank, and the ACLU, and Cato Institute 
and many others. So this is a remedy whose time hopefully has 
come, and you have made a great contribution and we will hear 
from you again on panel three then. 

Mr. Hyde. Very well. Mr. Cutkomp. 

Mr. Cutkomp. Yes, sir. 

Mr. Hyde. If you would fix your microphone. That's right, and 
talk into the microphone. 

Mr. Cutkomp. OK. 

Mr. Hyde. What is your name? 

Mr. Cutkomp. My name is King Cutkomp from Rock Island, IL. 

Mr. Hyde. What is your business or profession? 

Mr. Cutkomp. I am in the wholesale food business, wholesale 
food distributor. 

Mr. Hyde. Very good. And would you tell us your story as it in- 
volves asset forfeiture. 

STATEMENT OF KING CUTKOMP 

Mr. Cutkomp. OK. Thank you very much. 

I sincerely appreciate this opportunity to speak to you, a person, 
about my mother's experience with the abuse of our national civil 
forfeiture law, a law which ignores due process, encourages abuse 
by police and prosecutors, confiscates property from innocent, law- 
abiding citizens, and threatens our sacred honor with the tyranny 
of a police state. 

My mother is an 85-pound, 75-year-old, hard-working, frugal 
lady, who chose to squirrel away any extra money she had rather 
than buy herself any of the things most people consider necessities. 
Although she has bought a few residential rental properties, she 
still tears Kleenexes in half to stretch her money and settles for 
eating half sandwiches rather than run up her grocery bill. She has 



19 

never taken a vacation or missed a day's work in the business, but 
neither has she ever been to a shopping mall. 

She has always lived as though the next Great Depression would 
happen any day. By 70, she managed to save around $70,000, 
which she kept in her house because her Depression experience 
taught her not to always trust banks. 

In December 1989, the U.S. Government came to my mother's 
house and took her savings from a floor safe in the basement. 
Three months later, they seized her home and two rental prop- 
erties she owned. 

You need to know, my innocent mother was never charged with 
a crime, and the police acknowledged she was never part of my 
brother's marijuana ring conspiracy. Mom's biggest sin was allow- 
ing the adult son she loved to live next door to her. 

After my brother was indicted, he fled town. The Grovernment 
suspected she probably had allowed him to use her property ille- 
gally and probably had been given cash earned by him illegally. As 
you know, asset forfeiture laws only require probable cause to seize 
property. Once property has been seized, it is the owner's burden 
to prove innocence to the Government. 

When this happened to Mom, I thought innocent until proven 
guilty would apply in her case, and she would immediately get her 
cash back. So trusting the Government, I didn't even hire an attor- 
ney for that matter. I soon learned later that under the Constitu- 
tion a citizen isn't afforded an innocent until proven guilty in civil 
forfeiture cases. She wasn't considered innocent, and the Govern- 
ment didn't have to prove anything. 

The $70,000 they took from Mom was mostly old bills dated from 
the 1960's and 1970's and was covered with mold and mildew. The 
safe was rusted shut, and the safe handle broke off, and the whole 
safe had to be drilled open. Tragically, the FBI did not keep her 
cash in an evidence locker, but deposited her money into a bank, 
commingling it with other people's money and thus destroying her 
evidence and proof of innocence. 

The morning Government agents banged on Mom's door telling 
her that they were there to seize her home, it included the local 
police, county sheriffs department, U.S. Marshal's Service, several 
FBI agents and IRS agents; about 20 all in total. All this force to 
take some propercy from one innocent, unarmed, law-abiding 70- 
year-old, 85-pound woman. 

I immediately called our family attorney, and he met me at 
mom's house. He had previously been — it had previously been said 
to me by one of the agents, now they want to take everything your 
mother has and make her tell what she knows about your brother 
and be abl€ to make him come back, too. 

When I arrived at mom's house, she was in a daze. She said she 
asked the agents where she was supposed to live and was told, I 
don't care where you go, but you have got half an hour to pack up 
and get out. 

Thankfully our attorney was able to reach an agreement that al- 
lowed mom to rent her own house from the Government until the 
case went to trial. The horror of the forfeiture squad invading her 
home still brings regular nightmares to mom 6 years later. 



20 

I did everything in my power to convince the Government agents 
that they were making a huge mistake and that mom was not a 
criminal. To them, that didn t matter. Since they could seize her 
property, they did. An agent said to me, when I first took this case 
to my boss, he said not even to mess around with it, that it was 
just another stupid marijuana case, until I showed him how many 
assets we could get. 

I spent many, many cooperative and truthful hours trying to con- 
vince them that this was insane and finally realized it would cost 
me more going to trial than her properties were worth. I eventually 
made a settlement with them, and Mom got to keep a little of what 
she worked her whole life for. They took most of it, including her 
dignity and love for our Grovemment. 

I am here for a mother — for my mom and our country. It is too 
late to help her case, and I had the Government sign a paper that 
they can never bother her again. I want to make sure that they can 
never do this to another mother with a bad kid. 

I have been on this crusade since I saw a Reader's Digest article 
in 1992 entitled "Is It Police Work or Plunder?" about nationwide 
forfeiture abuse and Congressman Hyde's effort to reform this law. 
I bought a computer, joined an on-line Internet service, and have 
been E-mailing thousands of unaware citizens to educate them 
about this barbaric civil forfeiture law. Nobody thinks it is right 
when they learn how it is used. 

One prosecutor told me, citizens don't need a proof provision. 
Those in charge of a case are perfectly capable of determining who 
is guilty. That statement, I was told by a constitutional law profes- 
sor, is a definition of tyranny. 

I love the America I knew growing up in the 1940's and 1950's, 
and I am scared to death of the police state this country could be- 
come with more and more laws allowing forfeiture. It has to stop. 
Our Founding Fathers put their lives on the line against tyranny 
and cavalier attitudes. In my opinion, no real or personal property 
should be forfeited except in criminal cases. Eliminate this ridicu- 
lous, insane, corrupt law or rewrite it to include proof, fairness and 
compassion. It is ruining people's lives and is just another national 
disgrace. 

Thank you. 

[The prepared statement of Mr. Cutkomp follows:] 



21 

Prepared Statement of King Cutkomp 

I sincerely appreciate this opponuoity to speak to you in person about my mother's expenence 
with the abuse of our national civil forfeiture law, a law which ignores due process, encourages 
abuse by police and prosecutors, confiscates property from innoceot law abiding citizens and 
threatens our sacred honor with the tyranny of « police state. My mother is an 85 pound. 75 
year old hardworking frugal lady, who chose to squirrel away any extra money she had rather 
than buy herself any of the things most people consider itecessities. Although she has bought a 
few residential rental properties, she still tears Kleenex in half to stretch her money, and settles 
for eating half sandwiches rather than run up her grocery bill. She has never taken a vacation or 
missed a day's work in the business, but neither has she ever been to a shopping mall. She's 
always lived as though the next Great Depression would happen any day. By 70, she managed 
to save around S70.000 which she kept in her house because her Depression experience taught 
her not to always trust banks 

In December of 1989. the U.S. Government came to my mother's home and took her savings 
from a floor safe in her basement. Three months later, they seized her home and two rental 
properties she owned. You need to know my innocent mother was never charged with a crime, 
and the police acknowledged she was never pan of my brother's marijuana ring conspiracy. 
Mom's biggest sin was allowing the adult son she loved to live next door to her. After my 
brother was indicted, he fled towa The government suspected she PROBABLY had allowed 
him to use her property illegally, and PROBABLY been given cash earned by him illegally. As 
you know, asset forfeiture laws only require probable cause to seize property. 
Once property has been seized it is the owner's burden to prove innocence to the government. 



22 



When this happened to Mom, I thought "innocent until proven guilty" would apply in her cose 
and she would immediately get her cksh back Trusting the government. I didn't even hire an 
attorney then for that matter I soon learned later that under the Constitution a citizen isn't 
afforded innocent until proven guilty in civil forfeiture cases. She wasnt considered innocent 
and the government didnt have to prove anything. 

The S70,000 they took from mom was mostly old bills dated from the 60's and 70'$ and was 
covered with mold and mildew. The safe was rusted shut and had to be drilled open. Tragically, 
the FBI did not keep her cash in an evidence locker, but deposited her money into a bank, co- 
mmgling it with other people's money and thus destroying her evidence and proof of innocence. 

The morning government agents banged on Mom's door telling her they were there to seize her 
home, it included the local police, County Sheriffs E>ept., U.S. Marshall's Service, several FBI 
agents, and [RS agents. All this force to take some property from one. innocent, unarmed. law 
abiding 70 year old, 8S pound woman I immediately called our family attorney and he met me 
at Mom's house. It had previously been said to me by an agent, "They want to take 
everything your mother has a make her tell what she knows about your brother, and 
maybe it will make him come back, too I" 

When I arrived at Mom's home she was in a daze. She said she asked the agents where she 
was suppose to live and was told, "/ dont care where you go, but you have a half-hour to 
pack up and get out I" Thankfully, our attorney was able to reach an agreement that allowed 
Mom to "rent" her own house from the government until the case went to thai. The horror of 
the forfeiture squad invading her home still brings regular nightmares to mom 6 years later. 



23 



I did everything in my power to convince the governinent agents that they were making a huge 
misuke and that mom was not a criminal. To them that didn't matter. Since they COULD seize 
her property, they did An agent said to me, "IVhen I first look this caxe to my boss, he said 
not even to mess around with it. that it was just another stupid marijuana case, until I 
showed him how many assets we could getl' I spent many, many cooperative and truthful 
hours trying to convince them that this was insane, and fitially realized it would cost me more 
going to trial than her properties were worth I eventually made a settlement with them and 
Mom got to keep a little of what she worked her whole life for. They took most of it, including 
her dignity and love for our government. 

I am here for my mother and our Country. It is too late to help her case, and besides, I had the 
government sign a paper that they could never bother her again. I watit to make sure they can 
never do this to another mother with a bad kid I have been on this crusade since I saw a 
Readers Digest article in 1992, titled. Is It Police Work or Plunder, about rutionwide forfeiture 
abuse and Congressman Hyde's eflfott to reform this law. I bought a computer, joined an Online 
Internet Service and have been emailing thousands of unaware citizens to educate them about 
this barbanc civil forfeiture law. Nobody thinks it is right when they learn how it is used, except 
prosecutors who do not want a proof provision in the law. One prosecutor told me. "Citizens 
don't need a proof provision, those in charge of a case are perfectly capable of 
determining who is guilty]" That Statement, I was told by a Constitutional law professor, is the 
meaning of tyranny 

I love the America I knew growing up in the 40's and 50's. but am scared to death of the police 



24 



sute this Country is turning into wixb mors and mare laws allowing forfeiture. IT MAS TO 
STOP. Our Founding Fathers put their lives on the line agamst t}Tsnny and ca\-alier attitudes In 
my opinion, no real or personal property should be forfeited except m cnminal cases Eliminate 
this ridiculous, insane, corrupting law. or re^write it to include proof, fairness and compassion. 
It is ruining people's lives and is just another national disgrace. Thank you 

Other material furnished to you: 

The book I titled, U.S. v. Grandma, and the two flyers I email out all over America. 



25 



Book Review by Kathy Bergman 

March 19% FEAR Chronicles Forfeiture Endangers Amencan Rights 

V.S. i-s. GRANDMA 

in October of 1989, Man,' Miller's youngest son was indicted by a midwestem grand jury 
for trafficking in manjuana. Over the next four years, Mary was forced to pa\ . liieralK . 
for her son's crimes 

Never charged with a crime herself, 75 year old Mary Miller had S70.000 in cash, her 
home and several pieces of rental property seized by the federal government, because 
they believed she knew of her son's cnmes. Her money, the government said, was not her 
life's savings as she claimed, but rather, the ill-gotten gains of Toby Miller's life of cnme. 
Her real estate, the government went on to reason, was used to "facilitate" Toby's cnmes 
when he lived as a tenant in Mary's duplex, and therefore should be forfeited also In 
addition to that, she couldn't use the old dates on the cash in her defense because the FBI 
co-mingled her money by depositing it into a bank. 

From October 1989 through August 1995, 122 newspaper headlines in a small 
midwestem city focused on Mary Miller's troubles. Her oldest son. Charles, and his 
family were subjected to local scrutiny and discussion also. In an attempt to regain his 
mother's property by producing an accurate chronologic record, Charles Miller set about 
detailing the facts surrounding Mary Miller's forfeitures, which eventually resulted m a 
book he titled U.S. vs. Grandma. 

Because we were so impressed with Mr. Miller's first-hand account of his battle with the 
forfeiture squads on behalf of his innocent mother, FEAR, has agreed to publish a soft- 
back version of L'.S. vs. Grandma. Please purchase this book and use it to educate 
yourself to the realities of how our country's forfeiture laws are being used Then, call or 
wTiie your Congressman and Senators and demand they change the lav\ In fact, why not 
purchase a second book for your legislators, and request they read it! Congress names 
and addresses in Washington, DC. can be had at 1-202-224-3121 

U.S. v.v Grandma is available for SI 5 from FEAR. Foundation, 20 Sunnvside. Suite A- 
204. Mill Valley, CA 94941. 1-415-388-8128 http;./ www. fear. org 

"Mary, we're here to seize your house. I don't care where 
you go but you have a half hour to pack up and get out !" 




26 
" You have a half hour to pack up and get out '." 

Civil propcm forfeiture laws - The landlord was not charged with anMhing and was free to go. but his rental 
properrv was seized Unknown to him. pot was sold out of one of his tenuis The US Supreme Coun upheld 
the seizing ot a wife's car because her husband used it to solicit a prostitute In each case, the owner's 
innocence was irrelevant, because the charges were just against their propcrn . not the owTier 

Authonties ask airline ticket and travel counters to watch for people who pay cash for their tickets ^^'hlle a 
black man was waiting for his plane, on mere suspicion, the law showed up and seized his cash and then his 
landscaping business He was free to go. because the charge was just against his assets \ federal prosector 
was stopped for speeding, knowing what police were doing in his district, he was nervous because he had S300 
cash on him 

The intent of civil forfeiture laws was to take the ill-gotten gains of real cnminals. but it also tempts the 
imagination of many authonties because there is no provision in tbe law for proof. A prosecutor said. 
"Citizens don't need proof protection, those m charge of a case are perfectly capable of determining who (what) 
IS guilrv '" A federal prosecutor in New Jersey was recently found guilty on 30 counts of forfeiture abuse and 
will be going to pnson. after ruining many people's lives F E.A.R brought many cases of abuse before Senate 
heanngs Congressman Conyers (D) said back then, "It wasn't suppose to work this way '" But it still is 

"Mary, we're here to seize your house. I don 't care where 
you go but you have a half hour to pack up and gel out .'" 



HO^^ DO \ Ol THINK IT SHOULD WORK 7 

• ifannhmg of \ours is accused of wTongdoing, should it have to be PROVEN in a court of law "* Yes No 

• PROOF BY I choose one) c clear & convincing, = beyond a reasonable doubt 

• Should vou have a heanng before real or personal propeny seizure, and absent owner protection '' Yes No 

• Would \ou like the Supreme Court to rule whether property forfeiture is even Constitutional '' Yes No 

Congressman Hyde (R-IL) is sponsonng forfeiture reform legislation. H.R.I916 Other legislators need 
educated about the abuse and how you feel about it Please speak up or this legal plunder will continue. Make 
blank copies of this convenient flyer for fnends Circle the answers and mail them to Congress t names and 
addresses m Washington. D C. 1-202-224-3121) Lobby your State legislators and localities, too. 

• Another idea, read the book ('.5. V. Gram/ma It will astound you ' Mail your legislator (s) a copy of the 
book with this flyer folded in it. To order L'.S. v. Grandma, pnnt clearly on the order form, clip it out and mail 
It with SI 5 ea pavable to F E.A.R Foundation ( Forfeiture Endangers Amencan Rights), 20 Sunnyside, Suite 
A204. Mill Valley. CA 94941 1-415-388-8128 htTp.//www fear.org Thanks for your interest in due process 



Name , Address 




Cit%. StatcZp . Phn E-mail_ 



Mail book (s) at SI 5 each. Total end S Signature Date_ 



27 

Mr. Hyde. Well, thank you, Mr. Cutkomp. And let me say this: 
I have a tremendous feeling of guilt, and I will tell you why. We 
let this happen. We let this happen. We keep the law in its status 
quo, and, as I hear these stories, I am chilled, I am appalled. 

And the Government is an engine. It doesn't have any morals. It 
has the morals of the people wno drive the engine. And some of 
them are decent, honorable people — most of them are decent, hon- 
orable people, but some of them are not. And for us to permit under 
the law this type of conduct to go on is our fault, and I feel very 
badly about it. And I think this is a bill that cries out — I am sure 
it can be improved, but let's get the best bill we can, and let's make 
this illegal. Let's make this terribly wrong. Legally, it is already 
morally terribly wrong. 

Mr. Cutkomp. Yes, it is. 

Mr. Hyde. I thank you for your courage, and Mr. Jones, for com- 
ing forward. You are soldiers in a very important battle, a battle 
of more than just due process: Decency. 

I thank you. 

Mr, Komie, would you give us your name, please? 

Mr. KOMIE. Stephen M. Komie. 

Mr. Hyde. What is your business or profession? 

Mr. Komie. I am an attorney and currently serving as secretary 
of the Illinois State Bar Association, which is proud to boast you 
as a member. 

Mr. Hyde. Thank you. And I think you and I shared lunch Fri- 
day? 

Mr. Komie. Yes, we did. 

Mr. Hyde. Mr. Komie, would you tell us what you have come 
here to tell us, please? 

STATEMENT OF STEPHEN M. KOMIE, SECRETARY, ILLINOIS, 
STATE BAR ASSOCIATION 

Mr. Komie. I have come here to speak on behalf of the 34,000 
members and a growing family of members — after every graduation 
of law school, we get another crowd — who support your efforts on 
behalf of the victims of the tyranny of asset forfeiture. This is one 
of the worst abuses of King George which has been incorporated 
into our law, and one need only visit your private office in this 
building to see the portrait of George Washington at Valley Forge 
to know that you are committed to eradicating the abuses of the 
Americans' rights anywhere they might be. 

We are confronted in Illinois with a system which has run 
amuck, which tends to go to the law enforcement officials. When- 
ever anyone has cash on their person, the law enforcement officials 
grab the cash and make the person justify their ownership of the 
cash at a later time, a later date and a later location. 

In my printed remarks, which I have sent forward to the commit- 
tee, I have discussed a number of abuses of this system of what we 
in Illinois call "contingent fee law enforcement." This is no different 
than parking tickets and a quota system. I am sure that if you sub- 
poenaed the Justice Department's memorandums between their of- 
fices, you will undoubtedly discover that quotas are given to indi- 
vidual offices, that production is expected, and they have to make 
so much each year, just as the people in Chicago who issue parking 



28 

tickets are expected to issue so many parking tickets and raise the ' 
city revenue. j 

Mr. Hydk. Are you suggesting, Mr. Komie, that the Justice De- ' 
partment imposes quotas on the various ofTices, Federal offices, ^ 
around the country? Do they have to produce so much in asset for- 
feiture revenue? I 

Mr. KoMiK. Oh, yes. In fact, vou might even see some of the ma- , 
terials that have been printed for this hearing. In one of those, 
there was a 1990 memorandum which indicated that there were \ 
budget quotas that had to be met and that they would be embar- ! 
rassed if these quotas weren't met. ! 

So it is in print, and it is circulating. I would suspect one of your ; 
subpoenas could flush out the exact details and how much each of- 
fice is expected to produce. 

Mr. Hyde. Who is the issuing office and who is the recipient of- 
fice of these directives? 

Mr. Komie. My guess would be it would be downtown Washing- 
ton, DC, right at the Justice Department, that whoever is in charge 
of that unit, the Assistant Attorney General or his designee. 

Mr. Hyde. It goes to a U.S. Attorney's Office? 

Mr. Komie. Yes. 

Mr. Hyde. Out in the field? 

Mr. Komie. Yes. Assistants have told me that they have to keep 
up. They can't just let these cases go or settle. They have to have 
so much money per year. 

Mr. Hyde. That's fascinating. Please go ahead. 

Mr. Komie. Now, with respect to some of the people that I have 
mentioned in my printed remarks, I think everybody in this room 
would agree that the American family farm is an institution which 
we have all endeavored to save one way or another, and we know 
that there are ownership problems in passing the farm down 
through the family. | 

Well, in Illinois, our legislature doesn't think that farms should 
be forfeited when people have marijuana growing on the farm. 
After all, Illinois was one of the states that the Federal Govern- 
ment planted marijuana in order to get hemp during World War 
II, for both the liberty ships and also for the Navy. So that mari- 
juana grows wild in Illinois. It also is sometimes cultivated by some 
of the children of farm owners. Yet, the legislature doesn't think 
that this is an appropriate method to be used, forfeiting the farm 
because one of the family members may grow marijuana on it or 
it may grow wild on the farm. 

The Stouts received from their father the family farm. They had 
a half interest in the farm. On the farm remained Mr. Stout's sis- 
ter, Mrs. Accardi. She was married to Greg Accardi. Greg Accardi, 
unfortunately, was growing marijuana behind the shed, in the 
back. The police did a flyover with the helicopter, looked down, saw 
marijuana, kicked in tne door at the family farm, came on in, 
seized the plants, of course, and then seized the farm. 

When the case came on for trial, there was a small problem. 
They didn't have a consent to search. None of the records of the 
Illinois State Police indicated they had a consent to search. Yet the 
day of trial the police officer who searched the farm walked in with 
a consent form with purportedly Greg's signature on it. That was 



29 

sent to the State police laboratory and it discovered that the signa- 
ture was a forgery; that Mr. Accardi had never signed for entry 
into the farm. 

So what did they do? They called their friends downtown at 219 
South Dearborn in the Federal building and said, seize the farm, 
and there they went. They seized the entire farm; never served no- 
tice on the Stouts in Michigan, where they lived. The only way it 
was published was through USA Today. There was no delivery 
even by a postal carrier of notice of the seizure of the farm. 

The Stouts had only been on the farm at Christmastime or for 
pheasant hunting when marijuana doesn't grow. Yet they end up 
in Federal court, innocent owners, one-half interest in the farm, 
nothing to do with the growing of the dope one way or the other, 
yet they find themselves in court defending this over 3 years now. 
They can't have possession of the farm. The U.S. marshals seized 
the farm. They made an agreement for Greg and Holly Accardi to 
remain on the farm by renting, and then have left them in a situa- 
tion where the only way out of the case short of trial is the Govern- 
ment wants them to pay the Government money as a settlement 
proposal. 

Mr. Hyde. This is still pending? 

Mr. KOMIE. Still pending in U.S. District Court for the Northern 
District of Illinois. 

Mr. Hyde. Eastern Division? 

Mr. KoMiE. Eastern Division, where you are a member. 

In addition, I have had the opportunity to represent a grand- 
mother, too. There is Mrs. Levine of Los Angeles, CA, had a grand- 
son who was a gentleman who was in the drug business, big time, 
no doubt about it. 

He was indicted, had all his assets seized. But Ms. Levine had 
an estate plan, which many Americans use, and that is they have 
a trust in the bank where they put the money in in their name and 
in the event they pass away some loved one ends up with the ac- 
count. 

When they sent out the forfeiture warrants they collected every- 
thing with name Hershman on it, which was her grandson's name. 
Ms. Levine had to live off her social security for 3 years, until some 
assistant in Chicago thought it was OK to return the money. 

Despite repeated demands, the woman had nothing whatsoever 
to do with drugs, she was in a retirement home, but her money 
was seized by the Federal Government and she was forced to en- 
dure attorney's fees to get it back. 

Then there was Mr. Tan. He was walking through Union Station 
in Chicago on his way between trains. Because he was Chinese, he 
stood out in our station because we don't have a lot of Chinese 
traveling through Union Station. They cornered him in the first 
class lounge. They made him open his suitcase. His entire capital 
for his business was in that suitcase. They took him half a mile to 
their office. In the office they took the money. 

They then counted the money in a machine that had been con- 
taminated by drugs, a money-counting machine, which had never 
been cleaned, and then subjected it to a dog search. Based on that 
they made him come all the way from Hong Kong back to the Unit- 



35-668 96-2 



30 

ed States in order to get his money back, and it wasn't until he had 
a trial; there was no attempt at settlement. 

Mr. Hyde. How much money? 

Mr. KOMIE. We are talking about $230,000. 

Mr. Hyde. He was carrying it in cash? 

Mr. KOMIE. Yes. Like Mr. Jones said, if you have cash you get 
a substantial discount when you buy a product. If you buy with 
cash, you don't have to pay the 3 percent the credit card companies 
charge, Americans want cash in their businesses and so they read- 
ily accept it. 

But the Government has a different idea. They believe no Amer- 
ican should carry cash, only a credit card. Once you have cash on 
yourself, you must justify it. Interestingly enough, there is no clerk 
of the circuit court in Illinois who will accept anything but cash; 
you can't get somebody out on bond without cash. So if someone is 
arrested on the way to the bond office to bail their child out and 
the money is attempted to be forfeited, that is the only way you 
can get them out of jail is with cash. 

Mr. Hyde. We have heard testimony about testing of the money 
for suspicion of drugs and dogs sniffing it. Do you have any infor- 
mation on the prevalence of evidence that paper money, currency 
has been near drugs? I am told that almost all money has 
some 

Mr. KOMIE. I would refer you to the American Bar Association 
report that Ms. Reno's purse had been subjected to a dog sniff and 
it was discovered that the dog had an affinity for some of the 
money in her purse; so the prevalence of the contamination of the 
currency reaches as high as Ms. Reno's purse. 

And from what I understand, based on the indications I have 
had, Mr. Angelos, a chemist with the Drug Enforcement Adminis- 
tration, has published a memorandum informing them that there 
is contamination on every one of the rollers in the Federal Reserve 
Banks of the United States, that as soon as the money is deposited 
in the Federal Reserve Bank or any member banks and goes 
through the roller system, the contamination is placed on other 
bills. So it is well known inside the Grovernment, at any rate, that 
there is a contamination problem brought about by the bills run- 
ning through the system themselves. 

Mr. Hyde. So that is not a very efficacious way of determining 
whether their money has been involved in a drug transaction with 
this person? 

Mr. KoMiE. Let me tell you, to law enforcement people it is a 
joke. They take the money to the bank and deposit it immediately. 
They don't even send it to the laboratory for testing. 

As the gentleman to my left told you, his mother's money was 
evaporated into the banking system so a laboratory could never 
test the money. And that would be the key to proving innocence. 

What happens if you have one bill in 300 that has some cocaine 
on it. Do you lose all other 299 bills because one bill is contami- 
nated? That is the problem. Law enforcement agencies don't even 
take that seriously. I have never had a case they haven't deposited 
the money directly in the bank. 

Mr. Hyde, Please proceed. 



31 

Mr. KOMIE. Lastly, there is Mr. Lombardo. Mr. Lombardo oper- 
ated a pizza parlor in Chicago. He is an elderly gentleman. His 
life's work went into that pizza parlor. He was an immigrant. He 
didn't believe in banks. 

A burglar by profession and drug addict claimed that stolen prop- 
erty was being sold on the back steps of the pizza parlor in the 
parking lot. The Chicago police got a warrant for the premises, 
found no stolen property, no drugs, but half a million dollars of Mr. 
Lombardo's lifetime savings sitting in a barrel in the back of the 
pizzeria in a boarded-up dumbwaiter, which was his bank. 

They seized the monev. Since they were Chicago police officers, 
it went straight to the Chicago Police Department, deposited imme- 
diately in a bank so that Mr. Lombardo had no opportunity to have 
the money tested. 

They took the money off the premises to the police station where 
they claim a dog sniffed it. Other than that, they had no informa- 
tion at that time that this had anything to do with drugs whatso- 
ever. 

Mr. Lombardo filed in the Circuit Court of Cook County a motion 
to return his property. A judge heard that motion, but while the 
motion was pending, when the Chicago Police Department realized 
that they weren't going to be able to hold on to the money under 
the law, they petitioned the Drug Enforcement Administration and 
the IRS to come in and seize it. So a warrant was issued by a Fed- 
eral magistrate under the forfeiture laws before the State court 
judge had finished his work on the case, ordering the seizure of the 
money. 

There was a little problem the Government encountered, and 
that is, under the Federal law once a State court takes possession 
of the money, the Federal Government has to sit back and wait. 
They can come to court and litigate the ownership or they can 
bring their forfeiture petition in front of a State judge. Instead, 
they declined. 

They waited until Mr. Lombardo had won his motion for return 
of property, and then obtained a court order from a Federal judge 
ordering Mr. Lombardo to bring the check — this is no longer the al- 
leged offending money, this is the money from the clerk of the Cir- 
cuit Court of Cook County, IL, which is coming out by check, to 
bring the check to the Federal building and voluntarily, via court 
order, hand it to the U.S. marshal for forfeiture. 

The case proceeds, Mr. Lombardo never had a day in court. Not 
one witness has been heard from the witness stand. Not one wit- 
ness set foot in the building. His half a million dollars was forfeited 
2 weeks ago by a Federal judge granting summary judgment based 
on an affidavit of an IRS agent who heard vis-a-vis the informant 
who talked about the stolen property that turned out not to exist, 
that there was cocaine in a delivery truck out in back of the pizza 
parlor and that he stole the cocaine and used it and therefore he 
suspected drugs were being used at the pizza parlor. 

Mr. Hyde. Was there proof that he knew of these transactions 
or that he consented to them? 

Mr. KOMIE. Mr. Lombardo filed an affidavit in answer to the 
summary judgment saying that the money was never earned as a 
result of the narcotics business. But summary judgment was grant- 



32 

ed because the burden of proof shifted to Mr. Lombardo to prove 
he was innocent and the (government by appearing in front of a 
magistrate, ex parte, no lawyer there representing Mr. Lombardo, 
that was sufficient to force the burden of proof on Mr. Lombardo 
to forfeit his money. The only way he is going to correct this is by 
going to an appellate court. 

Mr. Hydp:. It makes a joke of due process, doesn't it? 

Mr. KoMiE. It makes the "d" so small you need a pair of glasses 
or a magnifier to see it. 

Mr. Hyde. Is that your testimony? 

Mr. KoMlE. I would like to summarize, Mr. Chairman, by saying 
that we want to help you and the members of this committee in 
any way, shape or form to bring about reform in an area where the 
American public is unaware, except by your efforts, by your book 
and the publication of the Pittsburgh Press, in an area where the 
American public is largely uninformed about how insensitive our 
courts are, in an area where there is no oversight of the people 
making the decisions, in an area where there has never been a Jus- 
tice Department official fired for making a mistake. 

This is an area where there needs to be oversight, there needs 
to be an active change in the law. And in our printed statement 
we have made a couple of suggestions; require delivery directly to 
the person who is going to be forfeited. 

In one case, Mr. Bryant, he was walking through the Detroit Air- 
port — and, by the way, you should know that the Government has 
a program of paying off ticket agents who work for the airlines a 
certain percentage of the forfeiture. 

Anyone who shows up at the counter and pays cash, they imme- 
diately call the DEA Task Force and say someone just paid cash, 
this is the description of that person, grab them at the gate, and 
the task force goes to the gate. These people have their property 
taken and don't even get the letter delivered to them. 

It is either published in USA Today, and 21 days thereafter the 
money is considered forfeited, or the land is considered forfeited, or 
the other opportunity is that they don't have to sign for the notice. 
There is no requirement in the law that there be a registered letter 
or summons issued to the person who is being forfeited. 

Mr. Hyde. So the clock starts running on their statute of limita- 
tions, their 10 days, and they don't know it? 

Mr. KOMIE. Right. In Mr. Bryant's case, he was walking through 
the Detroit Airport and they delivered the letter to his neighbor. 
The neighbor thought she was doing him a favor by picking up the 
letter and he didn't get it until after the 21 days had elapsed. And 
so he had to go to Federal court, obtain an order from a Federal 
judge setting aside the forfeiture, despite numerous attempts to get 
the mitigation of the Justice Department, to mitigate the forfeiture 
that had already entered and he even supplied a cost bond. 

He had a postmarked envelope and a cost bond that he sent in. 
They lost it and wouldn't even allow him to replace it. It is a ter- 
rible situation. So we need to require registered mail or a sum- 
mons. We need to require the Federal judges to hear motions to 
suppress and prohibit summary judgment. 

Summary judgment in the current state of the law allows the 
Government to nave the magistrate make the whole decision and 



33 

the individual comine to court has no chance against that decision 
because the two of them where not in the courtroom at the same 
time the decision is being made. So summary judgment needs to 
be prohibited in these types of cases. 

We need to ehminate "contingent fee law enforcement" by requir- 
ing that these monies either go to alternatives to sentencing, alter- 
natives to incarceration and drug programs so these people don't 
come back into the court system, the people who are charged with 
crimes and convicted. 

We need to leave to the States the question of the family farm. 
By allowing the local police when they get caught doing something 
wrong to call the Federal folks to bail them out is not good policy. 
The local circuit court judge should be in charge of what is going 
on in his own county and the marijuana-growing family farm 
should be left to the local State law and the issues raised by the 
ownership of the family farm by family members. 

We think you should prohibit Federal courts from intervening 
once a State court has obtained jurisdiction of the property. The 
case books are replete with observations of sheriffs who once they 
realize that they are losing in State court immediately call up the 
Federal Government and nave them come in and say, here, take 
the property to the Federal building, seize it and hand it over. And 
that is not limited to Illinois. It happens in other places. 

Mr. Hyde. What happens to the proceeds that are seized? Why 
is law enforcement so zealous? 

Mr. KOMIE. The answer to that is it turns out to be unappropri- 
ated expenditures for police departments. In other words, every 
government in the United States sits down every year and decides 
how much their budget is for what they do. So much of that goes 
to law enforcement. The chief of police has a budget that is ac- 
counted for. These moneys go back to whoever is responsible for 
bringing them to the attention of the Federal Government based on 
a formula. And when they get that money they don't have to an- 
swer to the city council, to the county board, or the State legisla- 
ture. 

Mr. Hyde. It is off budget? 

Mr. KoMiE. It is off budget. That is why it is "contingent fee law 
enforcement." It is in addition to the budget. That tank that they 
wanted to buy last year to suppress civil disturbance, the county 
board said no, that is a waste of money, we have one civil disturb- 
ance once every 10 years; now they can buy the tank if that is what 
they want. 

Mr. Hyde. Thank you very much. 

[The prepared statement of Mr. Komie follows:] 

Prepared Statement of Stephen M. Komie, Secretary, Illinois State Bar 

Association 

Mr. Chairman and Members of the Judiciary Committee, the Illinois State Bar 
Association is a private, voluntary association with more than 34,000 members and 
growing with each law school graduation. The Association has provided professional 
services to attorneys, referral services to the public, and education to attorneys, the 
judiciary, and the citizens of Illinois since 1877. We are the oldest bar association 
of practicing attorneys in Illinois. One of the touch stones of the Illinois State Bar 
Association is to advise the General Assembly in Illinois and the members of Con- 
gress on issues of public importance which bear upon the rights and liberties of the 
citizens of our great country. 



34 

In that regard, the Illinois Bar Association wishes to salute Chairman Henry J. 
Hyde for his leadership in tackling the issue of civil asset forfeiture. His book on 
the subject, "Forfeiting Our Property Rights," may be used as a manifesto of the im- 
portance of constitutional liberties, rights, and the rule of law. Chairman Hyde has 
been in the forefront of the debate over reform of a system run amok. We are espe- 
cially proud of the fact that Illinois lawyers are a part of providing a solution to 
the terrible iniustices resulting from civil asset forfeiture. With Chairman Hyde's 
leadership and followed by Representative Michael Patrick Flanagan, we are con- 
fident this Congress will succeed in providing necessary reform for the protection 
of the innocent. 

Incidentally, Chairman Hyde has been an ISBA member for more than 37 years 
and practiced law in the community which elected him to Congress. He is uniquely 
suited to bring forth H.R. 1916 because he knows firsthand the treatment innocent 
persons receive in the federal court. Today we stand in support of Chairman Hyde's 
efforts and urge continuing reforms which surpass those currently set forth in the 
Bill. For that reason we wish to bring to your attention the episodes of victims of 
the zeal of contingent fee law enforcement. As you know, the framers of the Con- 
stitution were very mistrustful of placing power in the hands of government and 
were especially fearful of placing power in the bureaucracy. Our forefathers would 
be shocked to learn that a person's home and property could be forfeited by the bu- 
reaucrats with the blessings of the federal judiciaiy without a jury ever seeing a 
witness or hearing any testimony. In 1789, George Washington and Thomas Jeffer- 
son would have told you such a thing was unconstitutional. In fact, every person 
to whom the United States Congress has built a monument and school children are 
taught to revere would protest this affront to our fundamental Constitutional ten- 
ants. However, since 1970, modem Americans have been confronted with draconian 
forfeiture proceedings. We at the Illinois Bar Association, while supporting law en- 
forcement, stand fast against civil asset forfeiture which fails to provide adequate 
protections for the innocent and the guilty alike. 

All Americans agree that the family farm has been an historic institution since 
the founding of the republic. As members of the Committee know, family farms have 
remained a part of the social fabric, contributed to the agricultural might of Amer- 
ica, and have acted as a stable social institution for over 250 years. Many Ameri- 
cans have left their farms to their children resulting in the operation of the farm 
by one brother or sister on behalf of the non-resident family members. In Illinois, 
for good reason, the Illinois General Assembly has never authorized the forfeiture 
of the family farm for growing marijuana. Obviously, marijuana could be grown on 
a large farm without the knowledge of the absent family members or could be grown 
by a child without the knowledge of his parents. Certainly, the family farm as an 
institution should be protected from seizure under those circumstances. Yet 21 
U.S.C. 881 authorizes the seizure of real property regardless of the drug involved 
or the quantity of the drug. So a family farm may be seized and forfeited for less 
than 5 marijuana plants. This is ironic because the Midwest the federal government 
had encouraged the planting of hemp for the production of rope for liberty ships and 
for use by our Navy in World War II. Hence, marijuana grows without cultivation 
in many parts of the Midwest. Therefore, there are many good reasons why the fam- 
ily farm should not be forfeitable. 

SEIZURE WITHOUT NOTICE 

Steven and Suzanne Stout are joint owners of a parcel of property commonly re- 
ferred to as 47 West 644 Route 30, Maple Park, Illinois. In actuality, this parcel 
is a family farm of which Steve Stout acquired a half interest as a gift from his 
father Paul. His sister. Holly Accardi, has lived on the family farm with her hus- 
band Greg and their three small sons. Steve Stout and his wife Suzanne, and their 
children live in Grand Rapids, Michigan. They would only come to the Accardi farm 
over the Christmas vacation and occasionally on Thanksgiving. During these times, 
they would sometimes hunt pheasant. 

On September 15, 1992, members of the Illinois State Police raided the Accardi 
farm. During the course of the raid, they entered the Accardis' farm without consent 
to search or a search warrant and began to search the farm before they contacted 
any of the owners. On the day of the nearing for the motion to suppress evidence, 
the police of fleer produced an alleged consent to search form purportedly ^ned by 
Gregory Accardi. This form was not in the file of the Illinois State Police. The form 
was sent to the Springfield laboratory of the State Police. There, Jeanne Brundige, 
a handwriting expert, employed by the Illinois State Police found Mr. Accardi's sig- 
nature was a forgery. Mr. Accardi so testified as did a privately retained hand- 
writing expert. Mr. Steven Kane. As the police were certain there would be difficul- 



35 

ties with their case in the state court, they turned the matter over to the Drug En- 
forcement Administration Forfeiture Unit. Since they could not seize and sell the 
farm by state law, they turned to the callous bureaucracy to take the family farm. 

After this storm trooper raid on the Accardi farm, the Stouts never received actual 
notice that their interest in the farm would be forfeited. An ex parte order was en- 
tered in the Federal District Court for the Northern District oi Illinois authorizing 
the seizing of the farm and other property on December 9, 1992. The Stouts received 
no actual notice of this ex parte proceeding. The Stouts did not receive actual service 
of the complaint of forfeiture of which was subsequently filed on December 14, 1992 
under cause number 92 C 7906. The government instead chose to publish notifica- 
tion in the newspaper the U.S.A. Today. The Stouts do not read this newspaper. 

People like the stouts are deemed innocent owners under the statutes. Tney had 
no idea that any contraband was present on the farm as they were only present on 
the farm during the winter months when no marijuana was or could be grown. The 
parcel of property has been in Steve Stout's family and he wishes to have the oppor- 
tunity to pass it on to his children. To do that he has been forced to retain the serv- 
ices of a Chicago lawyer and contest the ex parte seizure as well as the illegal entry 
by the police to preserve his and his wife's claim as innocent owners. This has cost 
him anticipated legal fees of up to $10,000.00 which is a great deal of money for 
a young family. The property that the Stouts always viewed as a source of solace 
and relaxation has now become a source of anguish and unforeseen expense. 

The lessons to be drawn from the Stout case are notice of the proceedings and 
the intended forfeiture should be delivered directly to the owner oi a property and 
not published solely in U.S.A. Today. Secondly, the family farm shoula not be sub- 
ject to seizure under these circumstances which place an ordinary citizen with little 
resources against the federal government. A federal judge must have discretion to 
appoint counsel to contest a lorfeiture and Chairman Hyde's Bill provides for ap- 
pointment of counsel. We support this provision. Finally, for the small amount of 
marijuana involved in this case, the Stouts have been subjected to several years of 
court proceedings and a demand from the federal government to pay the federal gov- 
ernment money to get their farm back or face the risks of trial. We hope this Bill 
will be amended to prohibit seizure of family farms for marijuana and leave this 
matter to the states consistent with their public policy. 

MAILING NOTICE TO THE WRONG PERSON 

Mr. Milton Bryan was walking through the Detroit Metro Airport. He was ap- 

firoached by the Airport DEA Task Force. Mr. Bryan is a black American. He was 
orced to produce identification and escorted by DEA Task Force members larger 
than him to their office more of Chairman Hyde s and encourages its enactment. 

grandma's bank ACCOUNTS 

Michael Hershman, a bona fide druggist without a license, was indicted for his 
drug business. Simultaneously, the government filed an asset forfeiture case against 
every asset in the name of Hershman. Michael Hershman's grandmother, Rachel 
Levine, had a savings account at Columbia Savings and Loan. The government 
seized the account in 1990. The account represented the lifetime savings of grand- 
ma. Fearing she would die. Grandma made Michael Hershman a beneficiary to her 
account in tne event of death. The Drug Enforcement Administration was extremely 
insensitive to grandma's estate plan. It took grandma three years and attorneys' 
fees to get the government to release grandma's money forcing her to live on her 
social security only. Grandma had no remedy or a federal judge to petition in order 
to release the account before the trial of the forfeiture action. Once again. Chairman 
Hyde's Bill provides for a release of property. We, the Illinois State Bar Association, 
support giving^federal judges discretion to release property to innocent owners be- 
fore the trial. Further, we request Congress state in the legislate purpose of the act 
the need to protect innocent owners from draconian actions of the bureaucracy. Fi- 
nally, the Bill should be amended to place mandatory time limits for hearing for 
innocent owners. In no case should the government avoid a hearing for temporary 
relief for more than ninety days. 

LIFETIME EARNINGS SEIZED AND FXJRFEITED WITHOUT A TRIAL 

Mr. Anthony Lombardo has owned a pizzeria which has supported him for several 
decades. Purportedly, an arrested burglar claimed he was selling stolen property on 
the back than a half-mile away from his boarding gate. There, they went through 
his cairy-on luggage. They discovered $32,000 in United States currency but found 
no drugs. The oincers insisted on taking the money and giving Mr. Bryan a receipt 
for his money. He then caught his plane to St. Louis where he was met by ofiicers 



36 

who demanded to search his checked baggage. They discovered no drugs and sent 
him on his way. One would think our kind federal government would send Mr. 
Bryan notice they intended to forfeit his money. They did sent notice to Mr. Bryan 
without restriction of delivery to the addressee only. Another person living in the 
same housing complex signed for the letter and did not give it to Mr. Bryan until 
too late. Upon receiving the letter several days late. Mr. Bryan post marked a claim 
and posted a cost bond which was lost by the Asset Forfeiture Unit of the Drug En- 
forcement Administration. Mr. Bryan though counsel contacted this unit and at- 
tempted to replace the missing cost bond with a second cashiers check from his 
bank. The Asset Forfeiture Unit refused to accept the replacement cost bond or the 
good faith efforts of Mr. Bryan to contest the forfeiture of nis money. 

Mr. Bryan filed a motion under Federal Criminal Rules of Procedure 41(e) to re- 
turn his property. A federal judge had to vacate a decree of forfeiture due to the 
absence of proper notice. According to the government it should not make any dif- 
ference who they deliver the notice to if they live in the same neighborhood. The 
lesson to be learned here is Congress shoulci require notice to be delivered to the 
owner of the property just like any other civil proceeding or require the post Office 
to deliver to the addressee (owner), only. Additionally, Congressman Hyde's Bill 

£ laces the burden of proof on the federal government and not the claimant. Here 
Ir. Bryan is being forced to prove the innocent nature of his money in federal court 
with no burden to prove the money is derived from the drug business. The Illinois 
Bar Association supports this reform steps of the pizza parlor. The Chicago Police 
Department obtained a search warrant for the crime oi receiving stolen property. 
The police searched the pizzeria and they find flour and pizza but no stolen prop- 
erty. However, Mr. Lombardo kept his savings in a barrel. The police seized 
$506,000.00 in United States currency in small bills. The police took the money to 
the Police Station. Since they found no drugs at the pizza parlor, they called for a 
dog to sniff the drugs. They claim the dog alerted to the presence of drug on cur- 
rency. They then deposited the money in a national bank. They paid no attention 
to the scientific research which demonstrates the money supply in the United States 
is contaminated by the rollers in the Federal Reserve Bank System. On this evi- 
dence alone, the (Jhicago Police justified the seizure of the money. Mr. Lombardo 
had no criminal record and no history of investigations for drug activities. So Mr. 
Lombardo comes to court in the Circuit Court of Cook County, Illinois. He filed a 
motion to return his property to him. The Chicago Police, well aware of the con- 
tinent fee law enforcement, authorized by 21 U.S.C. 881 called the Drug Enforce- 
ment Administration Asset Forfeiture Unit. The United States filed a case in federal 
court obtaining a warrant for the money although Mr. Lombardo was before a state 
court judge attempting to obtain his property. 

A week later a state court judge ordered the return of the money to Mr. 
Lombardo. The government obtains an order from a federal judge requiring him to 
bring the check given to him by the state court to the federal building and handed 
over to the U.S. Marshall. This was only the beginning of Mr. Lombardo's travail 
to obtain his property. The federal judge assigned to Mr. Lombardo's case refused 
to give Mr. Lombardo a hearing on a motion to dismiss for lack of jurisdiction, on 
a motion to suppress evidence seized, or on a motion to suppress evidence on the 
grounds the application for the search warrant was a fraud, and granted summary 
judgment in favor of the government without Mr. Lombardo and the judge ever lay- 
ing eyes on each other. Mr. Lombardo was never afforded a contested probable cause 
hearing as the court found the ex parte determination of a magistrate to issue a sei- 
zure warrant was sufficient to avoid the requirement of a trial. It is clear Mr. 
Lombardo got the least amount of due process our government could provide for 
him. As we said earlier, the founders of our country would be shocked and saddened 
to learn Mr. Lombardo's property could be seized and forfeited without a trial or 
a judge ever holding a hearing in open court. The lesson to be learned here is that 
a person can be stripped of their property without ever having a hearing a federal 
court. This case was decided solely on the paper filed and not the evidence heard 
by the court. Chairman Hyde's Bill takes a great step forward in shilling the burden 
back to the government to prove by clear and convincing evidence the criminality 
of the property. This will avoid the dire consequences suffered by Mr. Lombardo. 
The Bill should be attended to prohibit summary judgment and require hearings on 
motions to suppress evidence illegally seized. (Jases like Mr. Lomoardo's can only 
erode the confidence of the American people in the federal courts, their justice de- 
partment and their police agencies. Therefore, Chairman Hyde, we call upon you to 
strengthen the procedures to protect the liberties and property ownersnip of our 
people. 

The Illinois State Bar Association encourages and promotes the enactment of leg- 
islation which restores due process and protects the rights of the innocent and the 



37 

guilty alike. We stand ready to assist this Committee and its staff in the passage 
of H.R. 1916. We wish to thank you for the opportunity to appear here today and 
express our views. Please call upon us to assist you. We also ask that anyone inter- 
ested in this issue and other legal issues contact us at our Internet address at http:/ 
lwww.illinoisbar.org. Thank you. 

Mr. KOMIE. Thank you for having us. If we may be of any service 
to the committee, please call on us. 

Mr. Hyde. Thank you, and I am sure you will be. 

Mr. Frank. 

Mr. Frank. Mr. Chairman, I am delighted that you are taking 
the lead that you are taking, and as I have told vou, I will work 
as closely as possible with you to get this corrected. This is an em- 
barrassment. 

I was pleased in reading the Justice Department's testimony to 
see acknowledgment from them that serious change is needed, but 
that is long overdue. I gather we got a bill from them last week, 
so the hearing may have already had some positive impact. 

We have to legislate, and I would hope the administration would 
put aside the kind of bureaucratic impulses we sometimes get and 
join this. It is appalling what we hear. 

I wanted to note and I was pleased to hear Mr. Edwards say that 
he was compensated on behalf of Mr. Jones through the provision 
of the Civil Rights Act that allows for attorneys' fees. I know not 
all of our colleagues have been as supportive of that reimbursement 
for attorneys bringing civil rights cases, and I am delighted to see 
that this is a case where it worked well. It is a maligned provision 
but a very important one. 

A couple of questions because I am interested to hear from the 
administration. 

To Mr. Jones, and to Mr. Edwards, when they were, let me use 
the technical term, harassing you, did they ever bring forward evi- 
dence to suggest that vou had engaged in illegal activities other 
than the dogs sniffing the money? 

Was there anything they brought forward of any sort, Mr. Ed- 
wards. 

Mr. Edwards. No, sir. What they knew when they seized the 
money was that Willie Jones was an African -American who had 
bought with cash a round-trip ticket to Houston, that drug-source 
city in Texas, and was flying under his true name. That is how 
much they knew when they took his money. 

Mr. Frank. Flying under 

Mr. Edwards. His own name. Not an assumed name, but the 
same name that was on his driver's license. 

Mr. Frank. For that — that was all they had and all they ever 
had. At no point did they adduce anything that suggested that 
there was any wrongdoing of any sort? 

Mr. Edwards. That is correct. I think that is an accurate and 
fair statement. 

Mr. Frank. When did this happen? 

Mr. Edwards. The seizure occurred in late February 1991. The 
trial was in, as I recall, late 1992, and the court's decision ordering 
the return of the money was in 1993, roughly, almost 2V2 years 
later. 

Mr. Frank. Did you ever get a letter of apology in any Federal 
official on this? 



38 

Mr. Jones. No. None. 

Mr. Frank. That doesn't surprise me, but disappoints me a bit. 

Mr. Cutkomp, with your mother did they adduce any evidence 
that there was some comphcity on her part at any point? I am not 
talking about whether she was or wasn't. 

Did they have any evidence that suggested that she was? 

Mr. Cutkomp. She was never part of my brother's conspiracy. 

Mr. Frank. Did they claim she was? 

Mr. Cutkomp. No. 

Mr. Frank. Let me ask, particularly the attorneys here, others, 
is there any other area of American law that vou can think of 
where this kind of reversal of roles takes place, where fitting a pro- 
file doesn't simply subject you to the closer investigation? We have 
cases where if vou fit the profile, you get subjected to investigation, 
but where the burden of proof gets reversed? 

Mr. Komie, can you think of any other area? 

Mr. Komie. I can't think of any, or where people have the legal 
right to possess the property, which is the money, where they have 
to now prove that the source of the money is legitimate as opposed 
to the Government having the burdens. 

Mr. Edwards. No. I think there is nothing like forfeiture, and 
that is probably because of the historical basis of forfeiture. In colo- 
nial America if we didn't seize the ship that the smuggled goods 
came in on, the tiny Federal Government would have had no re- 
course. But the Justice Department has taken those quite irrele- 
vant traditions and spawned modem forfeiture. 

Mr. Frank. I guess it started with the precedent of having to se- 
cure the ship you sailed in on, and they have now applied the old 
saying, and the horse you rode in on. 

The last question I nad, as I read over the testimony in advance 
from the Treasury Department, they talked about the need to do 
this, where we were talking about goods which were themselves pi- 
rated, intellectual property abuse, ^r instance. 

Mr. Komie, is this procedure widely used across the board, or is 
it primarily in people being accused of drug abuses? 

Mr. Komie. This seems to go on throughout the United States, 
whether I am working in the Detroit area or any metropolitan area 
that has an airport or train station. In Florida, they have a inter- 
state highway system and stop buses. 

Mr. Frank. What the Treasury Department said is we need this 
because we have to protect people who have counterfeited or pirat- 
ed goods. Have you come across much use of it in that capacity? 

Mr. Komie. No. I have seen one case in Chicago where we had 
pirated goods, where they swooped down on somebody who was 
producing unauthorized sweatshirts, T-shirts. But my experience is 
that law enforcement does not enforce patent trademark and 
unique copyright items. They spend most of their time running 
after the crime of the time, which is murder, rape; that is what 
they primarily occupy themselves with. 

Mr. Frank. Is forfeiture mostly for drug enforcement? 

Mr. Komie. Yes, but in the case of Mr. Lombardo, it was the sto- 
len property police who picked up the money and then once it got 
there they realized, here is a bonanza. We can split it up if we take 
it to the Federal building. 



39 

Mr. Edwards. I believe there is a second area that has experi- 
enced very recent boom that is perhaps not quite as evasive as 
drug forfeiture, but currency violation forfeiture. I represent a 
country doctor in Alabama who had put his entire life savings in 
a bank, amounting to about $2.5 million, and had the interest off 
that account go to a school in his hometown, a private K through 
12 school that was about to close because of financial problems. 

About 2V2 years after he set up this account and after he had 
benefited the school to the tune of about half a million dollars, he 
took the money that he had hoarded over a lifetime of practicing 
medicine, he was almost 70 at the time, he had over $300,000 in 
the back of his closet and his wife finally persuaded him to take 
it out. So he put it in the bank to be added to this account he had 
set up for the school, and the bank president did not file a currency 
transaction report because the bank president, as he testified in 
deposition, knew the doctor was almost obsessive about not being 
known as a rich doc. He didn't want people to know he had that 
kind of money, this is sort of a throwback kind of doctor. He 
charges $5 for a routine office visit and drives an 8-year-old car. 

Mr. Frank. How many office visits does he happen to get in in 
a day? 

Mr. Edwards. A lot. He is a rare creature for 1996. 

Anyway, the Grovernment found out that this large amount of 
currency had been deposited to this account without a CTR being 
filed, so they seized the entire account, almost $3 million at that 
time, under section 981, alleging that the entire amount was for- 
feitable under the currency forfeiture statutes. 

A district court in Montgomery last year granted summary judg- 
ment in our favor. The doctor has now gotten back with interest 
all of the money, except the $300,000 cash deposit, and we are now 
litigating what happens to that money in the eleventh circuit. So 
it is attraction of the money. Any time there is a forfeiture statute 
on the books, those law enforcement agencies that deal with what- 
ever the law is are going to look for ways to take the money. 

Mr. Frank. Were they alleging any income tax violations in that 
case? 

Mr. Edwards. No. They tried to find some, but couldn't. We ulti- 
mately showed that the doctor had overreported his cash income 
and the IRS had to send him back $20,000-some. 

Mr. Frank. Thank you, Mr. Chairman. 

I want to say that you are performing a great service here, Mr. 
Chairman, ana I will do whatever I can to help you in its comple- 
tion. 

Mr. Hyde. Thank you very much. 

Mr. Gekas. 

Mr. Gekas. Yes. I thank the Chair. 

I wanted to ask Mr. Jones a couple of questions and/or his coun- 
sel. 

At the point of contact that you had, the first contact in which 
thev confiscated your sum of money, did they inform you that you 
haa a right to reclaim it or that there was a process available for 
you to go to court to try to get it back, to contest their action; did 
they inform you of that? 

Mr. Jones. They did somewhat inform me of that; right. 



40 

Mr. Gekas. What did they say you had a right to do? 

Mr. Jones, They told me if tne money was clean that I would be 
able to get the money back. 

Mr. Gekas. Did they tell you that you would have had to post 
bond? 

Mr. Jones. No. 

Mr. Gekas. You learned that later when you contacted your at- 
torney? 

Mr. Jones. That is correct. 

Mr. Gekas. Mr. Edwards, what was the predicate in the Civil 
Rights Act on which you founded the action? 

Mr. Edwards. There were two constitutional bases, first, denial 
of due process, because the Asset Forfeiture Office had refused to 
waive the bond requirement and allow us to get into court; and sec- 
ondarily, that the seizure of the money was without probable cause 
and violated Mr. Jones' rights under the fourth amendment against 
unreasonable search and seizure. We won ultimately on both 
points. 

Mr. Gekas. Is it to be assumed that when you finally did bring 
an action that, in effect, you had the burden of proof? 

Mr. Edwards. Oh, yes. 

Mr. Gekas. In all those proceedings under the Civil Rights Act? 

Mr. Edwards. That is correct. 

Mr. Gekas. So that even if this law were adopted you could still 
avail yourself of the Civil Rights Act if you found other bases, and 
you would still have the burden of proof there. If this bill had been 
in place and this were law, would you have resorted to the Civil 
Rights Act, do you think? 

Mr. Edwards. No. Because I believe under the provisions of this 
bill we would not have had the problem of not having $900 to pay 
the entrance fee to a Federal court and would have retained judi- 
cial review of the seizure without having to resort to becoming a 
plaintiff in a 1983 action. 

Mr. Gekas. Then the burden of proof under this new act would 
rest in the Grovernment's corner, as it were? 

Mr. Edwards. That is exactly right. 

Mr. Gekas. I have only one other question having to do with the 
gentleman whose mother was treated so undignifiably. Did they 
ever issue an apology to your mother? 

Mr. CUTKOMP. No, sir. 

Mr. Gekas. I apologize for them? 

Is your mother still living? 

Mr. CuTKOMP. Yes. 

Mr. Gekas. Tell her that we have all felt her pain, and I am not 
quoting anybody on that. 

I thank the Chair. 

I relinquish the time remaining. 

Mr. MOORHEAD [presiding]. All of us that have heard this testi- 
mony are appalled that such things can happen here in the United 
States where people's rights can be trampled so seriously, espe- 
cially without due process. I think the forfeiture laws can be of ben- 
efit. I hope that you do, too. 

In cases where there is a crack house being continuously used to 
sell narcotics, well-known to everybody, there is every reason in the 



41 

world that the property should be forfeited if that is what it is 
being used for. But in some cases, where automobiles are being 
used to transport illegals back and forth across the border, some- 
thing has to be done to stop that kind of action. But certainly to 
reach summary judgment without any evidence in these cases, cer- 
tainly goes far beyond what was ever intended, I am sure, by the 
legislators. 

Mr. Cutkomp, do you have a comment? 

Mr. Cutkomp. Can't you put something in for absent owners and 
innocent owner provisions? 

Mr. MOORHEAD. Where automobiles are involved, if there is a 
loan against the properties, normally in the cases I have heard of 
in California at least, the rights of the mortgage company or the 
lending company have been protected there, as they should be. But, 
obviously, if there is an unknowledgeable person that owns the 
property, that doesn't know anything about the crime being com- 
mitted, there should be a way 

Mr. Cutkomp. As long as there is a proof provision in it that 
keeps the table clear. 

Mr. MooRHEAD. I agree that should be there. 

Mr. Komie, do you tnink there is a place for asset forfeiture? 

Mr. KOMBE. Absolutely, there can be asset forfeiture if the prop- 
erty itself is offending, but the cases we have been telling you 
about today, the property has been innocent. 

Mr. MooRHEAD. I agree your cases are amazing situations where 
the law has been misused. 

Mr. KOMIE. We at the Illinois Bar Association support law en- 
forcement's efforts to eradicate drugs, but that is not what we are 
talking about. We are talking about a program that was thought 
to be good on the drawing board, that is turning out to be a disas- 
ter. 

Mr. MooRHEAD. It certainly sounds that way. 

I yield back. 

Mr. Hyde [presiding]. I want to thank this panel for very compel- 
ling testimony. I wish the world could hear it, or at least those peo- 
ple who are interested in justice, which we all ought to be. 

I thank you for your contributions. I hope some day we will have 
a signing ceremony at which all of you can be present. 

Mr. Komie. We would be honorea to attend, I am sure. 

Mr. Hyde. Thank you, Mr. Jones. Thank you, Mr. Cutkomp. 
Thank you, Mr. Komie. Thank you, Mr, Edwards. 

Our next panel consists of Stefan D. Cassella, Deputy Chief of 
the Asset Forfeiture and Money Laundering Section of the Depart- 
ment of Justice; and Jan P. Blanton, Director of the Treasury Exec- 
utive Office for Asset Forfeiture at the Department of Treasury. 

Together these two agencies represent the bulk of civil asset for- 
feitures at the Federal level. Joining them is James W. McMahon, 
superintendent of the New York State Police, here representing the 
International Association of Chiefs of Police. 

Perhaps we can start with Mr. Cassella. 

Normally we try to limit statements to 5 minutes, but I will, just 
with the admonition that we have several witnesses, if you could 
be less prolix than perhaps you would like to be, that is a softer 
way of saying it, but I don t want to cut anybody off. 



42 

STATEMENT OF STEFAN D. CASSELLA, DEPUTY CHIEFS ASSET 
FORFEITURE AND MONEY LAUNDERING SECTION, CRIMI- 
NAL DIVISION, DEPARTMENT OF JUSTICE 

Mr. Cassella. Good morning, Mr. Chairman. 

Five minutes will be fine. 1 understand that our formal state- 
ment will be included in the record. 

I would ask that the transmittal of the forfeiture bill that we 
sent Congress last week and the analysis of it also be included in 
the record. 

Mr. Hyde. Without objection, so ordered. 

[The information follows:] 



43 




U. S. Department of Justice 

Office of Legislative Affairs 



OfHce of the Ajsisum Anoiney GcnenI Washington. D.C. 20530 

July 17, 1996 



The Honorable Newt Gingrich 

Speaker 

United States House of Representatives 

Washington, D.C. 20515 

Dear Mr. Speaker: 

Enclosed is a draft bill, the "Forfeiture Act of 1996," 
which contains comprehensive legislative proposals to improve the 
asset forfeiture program. The proposals are designed to 
strengthen and enhance asset forfeiture, improve procedures to 
ensure fairness and due process to innoeeftt property owners, and 
resolve inconsistencies and ambiguities that have developed in 
forfeiture law. 

This proposal is the result of a thorough review of the 
federal statutes relating to asset forfeiture that has been 
undertaken by the Department of Justice for the past two years. 
As you know, forfeiture statutes were enacted by the First 
Congress and have been an important part of federal law 
enforcement for over two hundred years. That is no less true 
today. The forfeiture statutes enacted by Congress since 1970 
are an essential aspect of the federal arsenal of law enforcement 
tools that may be deployed in the war on crime. We have found, 
however, that the procedures that may have been appropriate 
historically for the forfeiture of smuggled goods, ships on the 
high seas, and certain types of contraband may need to be 
modified when forfeiture is directed toward assets such as 
residences, businesses and bank accounts. 

In formulating our own proposals to revise the forfeiture 
laws, we have sought to convey a sense of balance. Forfeiture is 
an essential law enforcement tool that can be made even more 
effective by enhancing and clarifying the powers of the 
government while improving procedures to ensure that the rights 
of innocent parties are fully protected. The bill recognizes the 
inocrtant role that both civil and criminal forfeiture have come 



44 



- 2 - 

to play in federal law enforcement and takes into account the 
procedural and substantive needs of the law enforcement 
community. Yet it acknowledges the need for procedural reform 
and adopts many of the changes suggested recently by Members of 
Congress and the organized bar. In short, the bill would ensure 
that the enforcement of the forfeiture laws will be tough -but 
fair. 

The most significant provisions of the bill include the 
following: The bill expands the categories of crimes for which 
forfeiture may be imposed. Most important, the proceeds of all 
crimes in Title 18 of the United States Code would be subject to 
forfeiture so that forfeiture would be available as a sanction in 
white collar crimes such as fraud and public corruption. In 
addition, the bill includes provisions expanding the category of 
property forfeitable in connection with alien smuggling and 
terrorism, and authorizing forfeiture for additional money 
laundering violations. 

The bill also includes several provisions designed to 
enhance the investigative tools available to law enforcement in 
forfeiture cases. These provisions are intended to assist the 
government in meeting the heightened burden of proof requirements 
set forth elsewhere in the bill by improving the government's 
ability to gather the evidence needed to build a competent case. 
Thus, the bill authorizes the use of grand jury material by 
government attorneys in civil forfeiture investigations, 
authorizes the issuance of civil investigative demands to gather 
evidence leading to the filing of a forfeiture complaint, gives 
government attorneys access to tax and credit report information 
in the course of forfeiture investigations, and permits the 
dismissal of claims where the claimant refuses to waive bank 
secrecy protections in foreign jurisdictions that limit the 
government's access to relevant documents. 

Finally, the bill includes a number of provisions that 
resolve ambiguities in the present forfeiture statutes. For 
example, the bill preserves the availability of property for 
criminal forfeiture by allowing courts to order defendants to 
repatriate forfeitable property from a foreign jurisdiction, and 
by authorizing the pretrial restraint of substitute assets in 
criminal cases. 

In addition to strengthening asset forfeiture as a law 
enforcement tool, the package contains proposals designed to 
ensure that the rights of innocent property owners are protected 
and to avoid unduly harsh application of the forfeiture laws. 
The most important of these provisions involve the burden of 
proof and the cost bond requirement in the area of civil 
forfeiture. The bill shifts the burden of proof from the 
property owner to the government and provides for waiver of the 



45 



cost bond in certain situations. It also extends the deadline 
for the filing of claims by property owners. 

Finally, the bill contains a uniform innocent owner defense. 
Presently, some civil forfeiture statutes contain no provision 
allowing even an innocent property owner to resist the forfeiture 
of his or her property if it was used by another person for an 
illegal purpose. Other statutes contain conflicting, 
inconsistent and sometimes inadequate innocent owner provisions. 
The uniform innocent owner provision is intended to ensure that 
property will not be forfeited if the owner establishes that he 
or she did not know of the illegal use of the property or that 
the owner did what any reasonable person would have done to stop 
the illegal use of the property once he or she found out about 
it . 

The purpose of this bill is to strengthen and improve the 
structure and operation of the Nation's asset forfeiture laws. 
It is not intended to be a revenue raising measure. The Omnibus 
Budget Reconciliation Act (OBRA) requires that all revenue and 
direct spending legislation meet a pay-as-you-go recjuirement . 
That is, no bill should result in an increase in the deficit; and 
if it does, it will trigger a sequester if it is not fully 
offset. The Forfeiture Act of 1996 would increase receipts and 
direct spending. Considered alone, it meets the pay-as-you-go 
requirement of OBRA. 

Our estimate of the impact of this proposed, bill on the 
deficit is: 

Fiscal Years 
(in millions of dollars) 

1996- 
1996 1997 1998 1998 
Receipts 33.250 33.250 33.250 99.750 
Outlays 30.495 30.495 30.495 91.485 
Net deficit 
effect -2.755 -2.755 -2.755 -8.265 

With respect to potential impacts on the criminal justice 
system, all of the criminal sanctions addressed by this 
legislation are economic in nature. It does not impose any new 
penalties involving incarceration, nor does it create any new 
offenses for which incarceration may be imposed. 

It would be appreciated if you would lay this bill before 
the House of Representatives. An identical proposal has been 
transmitted to the President of the Senate. 



46 



The Office of Management and Budget has advised that there 
is no objection to the presentation of this proposal to the 
Congress from the standpoint of the Administration's program. 



. C 




Andrew Fois 

Assistant Attorney General 



47 



FORFEITURE ACT OF 1996 

SECTION-BY-SECTION ANALYSIS 

Title I 

Section 101 Time for Filing Claim; Waiver of Cost Bond 

Under current law, a claimant may file a claim and bond to 
convert an administrative forfeiture to a judicial one at any- 
time after the property is seized. United States v. $52.800 in 
U.S. Currency . 33 F.3d 1337 (11th Cir. 1994). But the claim must 
be filed not later than 20 days from the date of first 
publication of notice of forfeiture. This requirement, which is 
applicable to all civil forfeitures based on the customs laws, 
see 19 U.S.C. § 1608, is much more restrictive than its 
counterpart in the criminal forfeiture statutes, and has been 
criticized for giving property owners too narrow an opportunity 
to exercise their right to a "day in court." 

The criminal forfeiture statutes give claimants 3 days from 
the final date of publication of the notice of forfeiture to file 
a claim. See e.g. 18 U.S.C. § 1963(1) (2). This procedure* 
represents a reasonable compromise between the property owner's 
interest in having a fair opportunity to file a claim in a * 
forfeiture proceeding and the government's interest in expediting 
the forfeiture process and avoiding unnecessary storage and 
maintenance costs in the vast majority of forfeiture cases in 
which no claim is ever filed. Accordin'giy;" section 1608 is 
amended to replace the 20-day rule with the 30-day rule that 
governs the filing of claims in criminal forfeiture cases. 

In filing the claim, the claimant will have to describe the 
nature of his or her ownership interest in the property, and how 
and when it was acquired. This minimal requirement is necessary 
to discourage the filing of spurious or baseless claims; but it 
is not intended to place on the seizing agency any duty to 
evaluate the merits of the claim. To the contrary, the seizing 
agency will simply transfer the claim to the United States 
Attorney to take whatever action is appropriate under the law. 

The amendment also amends the cost bond requirement present- 
ly set forth in 19 U.S.C. § 1608 to make it clear that no bond is 
required in forma pauperis cases as long as the petition is 
properly filed with all supporting information. In addition, the 
amendment authorizes the Attorney General and the Secretary of 
the Treasury to waive or reduce the cost bond requirement with 
respect to matters within their respective jurisdiction in 
categories of cases other than those involving indigency or 
substantial hardship. This provision will give the Attorney 
General and the Secretary the opportunity to review the policy 
reasons for requiring a cost bond and to waive or reduce the bond 
if those reasons do not apply in a given category of cases. 



48 



The amendment also amends current law by allowing the 
seizing agency to turn the case over to the U.S. Attorney in any 
district where venue for the judicial forfeiture action would 
lie, thus reflecting the enactment of the broadened venue and 
jurisdiction provision in 1992 which no longer limits venue to 
the district in which the property is located. United States v. 
$633,021.67 in U.S. Currency . 842 F. Supp. 528 (N.D. Ga. 1993) ; 
28 U.S.C. § 1355(b) . 

Other changes in the wording of § 1608 are merely for the 
purpose of clarity. Except as explicitly described above, the 
amendments are not intended to alter the ways in which seizing 
agencies process administrative forfeitures or turn them over to 
the U.S. Attorney when a claim and cost bond are filed. 

Section 102 Jurisdiction and Venue 

Historically, courts had in rem jurisdiction only over 
property located within the judicial district. Since 1986, 
however, Congress has enacted a number of jurisdictional and 
venue statutes permitting the courts to exercise authority over 
property located in other districts under certain circumstances. 
See 28 U.S.C. § 1355(b) (authorizing forfeiture over property in 
other districts where act giving rise to the forfeiture occurred 
in district where the court is located); 18 U.S.C. § 981(h) 
(creating expanded venue and jurisdiction over property located 
elsewhere that is related to a criminal prosecution pending in 
the district); 28 U.S.C. § 1355(d) (authorizing nationwide 
service of process in forfeiture cases>-r 

Many older statutes and rules, however, still contain 
language reflecting the old within-the-district requirements. 
These technical amendments bring those provisions up to date in 
accordance with the new venue and jurisdictional statutes. 
Indeed, several courts have already held that nationwide service 
of process provisions necessarily override Rule E(3) (a) . See 
United States v. Parcel I. Beginning at a Stake . 731 F. Supp. 
1348, 1352 (S.D. 111. 1990); United States v. Premises Known as 
Lots 50 Sc 51 . 681 F. Supp. 309, 313 (E.D.N.C. 1988) . The amend- 
ment is therefore intended merely to remove any ambiguity result- 
ing from Congress's previous omission in conforming Rule E and 
the other amended provisions to § 1355(d) as they apply to 
forfeiture cases. 

Section 103 Judicial Review of Administrative Forfeitures 

Administrative forfeitures are generally not subject to 
judicial review. See 19 U.S.C. § 1609(b) ("a declaration of 
forfeiture under this section shall have the same force and 
effect as a final decree and order of forfeiture in a judicial 
forfeiture proceeding in a district court"). Thus, if a claimant 
fails to file a claim opposing an administrative forfeiture 



49 



action, he may not subsequently ask a court to review the decla- 
ration of forfeiture on the merits. Linarez v. Department of 
Justice . 2 F.3d 208, 213 (7th Cir. 1993) ("A forfeiture cannot be 
challenged in district court under any legal theory if the claims 
could have been raised in an administrative proceeding, but were 
not . " ) . 

Fundamental fairness, however, requires that a claimant have 
the opportunity to attack an administrative forfeiture on the 
ground that the he did not file a timely claim because the 
government failed to provide him with notice of the administra- 
tive action. In such cases, it is appropriate for a court to 
determine if the government complied with the statutory notice 
provisions set forth in § 1607, and if not, to allow the claimant 
to file a claim in accordance with § 1608 notwithstanding the 
expiration of the claims period. See United States v. Woodall . 
12 F.3d 791, 793 {8th Cir. 1993). 

Under current law, however, it is unclear what statute gives 
the district courts jurisdiction to review due process challenges 
to administrative forfeiture; indeed, plaintiffs have attempted 
to base claims on a variety of provisions including the Tucker 
Act, 28 U.S.C. § 1346(a)(2); the Federal Tort Claims Act, 28 
U.S.C. § 1346(b); the Administrative Procedures Act, 5 U.S.C. 
§ 702; Rule 41(e) of the Federal Rules of Criminal Procedure; 28 
U.S.C. § 13 56; and the Fourth and Fifth Amendments to the 

Constitution. See Wright v. United States . F. Supp. , 

1995 WL 649560 (S.D.N.Y. Nov. 3, 1995). This has led to 
widespread confusion as different proc e d urGS are applied in 
different cases, including different statutes of limitations 
depending on the statute employed. See Williams v. PEA . 51 F.3d 
732 (7th Cir. 1995) (applying two-year statute of limitations but 
noting that the contours of the exercise of the court's equitable 
jurisdiction are "largely undefined"); Demma v. United States . 
1995 WL 642831 (N.D. 111. Oct. 31, 1995) (applying six-year 
statute of limitations to Tucker Act theory) . 

This amendment establishes a uniform procedure for 
litigating due process issues in accordance with the leading 
cases. See Toure v. United States . 24 F.3d 444 (2d Cir. 1994); 
Woodall . supra . Under this procedure, which is intended to be 
the exclusive procedure for challenging administrative forfeiture 
declarations, a claimant who establishes that the government 
failed to comply with the statutory notice requirements would be 
entitled to have the administrative forfeiture set aside so that 
he may file a claim and cost bond and force the government to 
initiate a judicial forfeiture action. If the property itself 
has already been disposed of, the claim would be made against a 
sum of money of equivalent value. See Republic National Bank v . 
United States . 113 S. Ct . 554 (1992). To invoke the jurisdiction 
of the district court under this provision, an action to set 
aside a declaration of forfeiture would have to be filed within 



50 



two years of the last date of publication of notice of the 
forfeiture of the property. 

As the appellate courts have held, the review of an 
administrative forfeiture under this section is limited to 

whether notice was adequate. Toure, 24 F.3d at . The 

claimant would not be entitled to use this section to seek review 
of the administrative forfeiture decree on the merits; nor could 
the claimant seek relief under this section if, notwithstanding 
the defect in the government's compliance with the notice 
provision, the claimant had actual notice of the seizure from 
some other source, or was actually present when the property was 
seized and knew that it would be forfeited. See United States v. 
Giovanelli . 807 F. Supp. 351 (S.D.N.Y. 1992) (claimant who had 
actual knowledge of the forfeiture cannot sit on his claim and 
then argue that the government's efforts to provide notice were 
inadequate), rev ' d 998 F.2d 116 (2d Cir. 1993); United States v. 
One 1987 Jeep Wrangler . 972 F.2d 472 (2d Cir. 1992) (lack of 
publication did not amount to violation of due process where 
claimant had actual knowledge of the seizure) ; Lopes v. United 
States . 862 F. Supp. 1178, 1188 (S.D.N.Y. 1994) (where there is 
actual notice of an impending forfeiture, there is no violation 
of due process) ; U-Series International Service v. United States . 
1995 WL 649932 (S.D.N.Y. Nov. 6, 1995) (same). 

The limitations in this section are applicable only to 
actions to set aside forfeiture decrees, and do not apply to 
actions against agencies for damages relating to the loss or 
destruction of seized property. . — - 

Section 104 Judicial Forfeiture of Real Property 

This amendment makes all real property "not subject to 
section 1607," see 19 U.S.C. § 1610, and thereby requires its 
judicial forfeiture rather than permitting the forfeiture to 
proceed administratively. The amendment provides added assurance 
that the requirements of due process that attend forfeitures of 
residences and business real estate will be observed. 

Section 105 Preservation of Arrested Real Property 

Rule E(4) (b) of the Supplemental Rules for Certain Admiralty 
and Maritime Claims governs the service of arrest warrants in rem 
in most civil forfeiture cases. The Rule provides that certain 
tangible property, including real property, may be arrested 
without seizing the property and displacing the owners or occu- 
pants. Commonly in such cases, the marshal or other person 
executing the warrant posts the warrant in a conspicuous place 
and leaves a copy of the forfeiture complaint with the person in 
possession or his agent. The government may also file a lis 
pendens to apprise all interested persons of the pendency of the 
forfeiture action. See United States v. James Daniel Good Real 



51 



Property . 114 S. Ct . 492 (1993); United States v. Twp. 17 R 4 . 
970 F.2d 984 (1st Cir. 1992) . 

This procedure is preferable in many cases to the actual 
seizure of the property because it permits the owners or occu- 
pants of the property to remain in possession of the property 
during the pendency of the forfeiture action. Government agents 
are sometimes reluctant to follow this procedure, however, 
because of legitimate concerns about the destruction or removal 
of the property or its contents by the persons in possession. 
The amendment is intended to address these concerns and thereby 
to encourage the use of the least intrusive means of arresting 
property by explicitly authorizing and directing the courts to 
issue any order necessary to prevent such diminution in the value 
of the property, including the value of the contents of the 
premises and any income, such as rents, generated by the 
property. 

Section 106 Amendment to Federal Tort Claims Act Exceptions 

The Federal Tort Claims Act currently bars claims arising 
from the detention of "goods and merchandise" by law enforcement 
officers in certain circumstances. See 28 U.S.C. § 2680(c). In 
Kurinslcv v. United States , 33 F.3d 594 (6th Cir. 1994), the court 
limited this provision to cases involving the enforcement of the 
customs and excise laws, thus exposing law enforcement agencies 
to liability when property is detained in other circumstances. 
This is of particular concern to the United States Marshals 
Service which is responsible for the datantion of property in a 
variety of circumstances not connected to the customs and excise 
laws . 

The amendment corrects the problem identified in Kurinskv by 
expanding § 2680(c) to cover any property detained by any law 
enforcement officer performing any official law enforcement 
function. In addition, however, this section exempts from the 
§ 2680(c) exception (and thereby allows) those tort claims that 
are based on damages to property while the property is in law 
enforcement custody for the purpose of forfeiture. 

This proposal addresses a legitimate concern that the law 
provide a remedy for citizens whose property is seized and is 
damaged or lost while it is in the possession of a government 
agency. This concern only applies, however, if the property is 
seized for the purpose of forfeiture but is not ultimately found 
to be subject to forfeiture. A pending forfeiture proceeding 
against seized property has the potential to make the related 
property damage claim moot. Therefore, the proposal makes clear 
that the claims would be permitted only if no forfeiture action 
is filed, or after forfeiture litigation is complete. The 
amendment also makes clear that this provision is limited to 
instances where property was seized for the purpose of 



52 



forfeiture. It does not apply in the types of routine customs 
cases that are exempted from the Tort Claims Act under current 
law. 

Section 107 Pre -Judgment Interest 

This amendment clarifies the law regarding the government's 
liability for pre-judgment interest in a forfeiture case that 
results in the entry of judgment for the claimant. Because the 
United States has not waived sovereign immunity, it is generally 
not liable for pre-judgment interest in forfeiture cases. See 
L ibrary of Congress v. Shaw . 478 U.S. 310, 311 (1986) (the 
government is not liable for interest on seized currency "in the 
absence of an express waiver of sovereign immunity from the award 
of interest"). Some courts have held, however, that sovereign 
immunity is not implicated when a court orders the government to 
disgorge benefits actually received as a result of the seizure of 
the claimant's property. See United States v. $277.000 U.S. 

Currency. F.3d , 1995 WL 675831 (9th Cir. Nov. 15, 1995); 

County of Oakland v. VISTA Disposal. Inc. . F. Supp. (E.D, 

Mich. Sept. 26, 1995) . 

The amendment adopts the reasoning of these courts and 
provides that notwithstanding the absence of a waiver of 
sovereign immunity, the United States will disgorge any money 
actually received as a result of investing seized property in an 
interest-bearing account or monetary instrument. The amendment 
makes clear, however, that the government is liable only for 
funds actually received; it is not liahlp -for the interest that 
could have been realized had the seized funds been invested at a 
higher rate or for a longer period of time. Nor is the 
government required to disgorge any intangible benefits. In 
particular, one court suggested that the government had to 
disgorge an amount of money equal to any savings the government 
enjoyed by virtue of not having to borrow money to finance the 
national debt as long as it held the seized property. $277, OOP . 
supra . Under the amendment, liability for such intangible 
benefits is precluded. 

Subtitle B -- Civil Forfeiture Investigations 

Section 121 Trial Procedure for Civil Forfeiture 

This section enacts a comprehensive set of procedures 
governing civil forfeiture cases under most federal statutes to 
be codified at 18 U.S.C. § 987. Modeled to a large extent on 
model civil forfeiture statute produced by the President's 
Commission on Model State Drug Laws, see Commission Forfeiture 
Reform Act ("CFRA"), it replaces the references to the customs 
laws that presently govern judicial proceedings in civil 
forfeiture cases. See 19 U.S.C. § 1615. 



53 



Subsection (a) provides that the Attorney General may file a 
civil forfeiture action in a district court under any statute for 
which civil forfeiture is authorized. In most cases, the filing 
of the complaint will follow the initiation of an administrative 
forfeiture under the customs laws, and the referral of the case 
to the U.S. Attorney when someone files a claim and cost bond 
pursuant to 19 U.S.C § 1608. This is the same procedure as 
exists under current law, and would continue to be the normal 
procedure . 

The complaint would be filed in the manner set forth in 
Rules C and E of the Federal Rules of Civil Procedure, 
Supplemental Rules for Certain Admiralty and Maritime Claims. 
See 28 U.S.C. § 2461(b). Because the provisions of the customs 
laws will no longer apply to the judicial forfeiture proceedings, 
the requirement that the Attorney General have probable cause for 
the initiation of a forfeiture action would not apply. See 
United States v. $191.910.00 in U.S. Currency . 16 F.3d 1051 (9th 
Cir. 1994) . Instead, the Attorney General could file the 
forfeiture action under the same criteria that apply to the 
initiation of any other civil enforcement action under federal 
law. The government would, of course, have to have probably 
cause and in most cases a warrant before it could seize any 
property. See seizure warrant provisions, infra . 

Where Congress has authorized both criminal and civil 
forfeiture for the same offense, the Attorney General would have 
the discretion to determine whether to institute a civil 
forfeiture action by filing a complaint, ui-a criminal action by 
including a forfeiture count in an indictment, information or 
criminal complaint. Where Congress has enacted a criminal 
forfeiture statute and a criminal prosecution is pending, it is 
usually more efficient to combine the forfeiture action with the 
criminal prosecution. But the civil forfeiture laws permit the 
government to bring forfeiture actions separate from and in 
addition to criminal prosecutions where the Attorney General 
determines that it is appropriate to do so. This is frequently 
the case where the criminal defendant is a fugitive, where the 
government's investigation regarding the forfeiture is not 
complete at the time the criminal indictment is filed, or where 
third party interests in the property must be adjudicated. 
Moreover, where Congress has not enacted a criminal forfeiture 
provision for a given offense, parallel civil and criminal cases 
are unavoidable. Thus, the statute authorizes the Attorney 
General to file a civil forfeiture action and a criminal 
indictment with respect to the same offense. 

Subsection (b) deals with situations in which a law 
enforcement agency has previously seized property for forfeiture 
but the forfeiture must be handled judicially instead of 
administratively either because the claimant has filed a claim 
and cost bond under the customs laws, see 19 U.S.C. § 1608, or 



54 



because the customs laws do not permit an administrative 
forfeiture of the particular property, see 19 U.S.C. § 1607 
(limiting administrative forfeitures generally to personal 
property valued at less than $500,000). The statute provides 
that in such cases, the Attorney General must determine whether 
to file a forfeiture action as soon as practicable. 

The statute avoids setting a definite time limit because 
there will be cases where the premature filing of a forfeiture 
action could adversely affect an ongoing criminal investigation. 
In particular, it is appropriate for the Attorney General to take 
into account the impact the filing of the civil case might have 
on on-going undercover operations and the disclosure of evidence 
being presented to a grand jury. 

Subsection (c) provides for the filing of a claim and answer 
by the claimant in the manner prescribed in Rule C of the 
Admiralty Rules. In addition, the statute sets forth certain 
requirements regarding the description of the claimant's 
ownership interest in the property that must be included in the 
claim. These are the same criteria currently required of a 
claimant in a criminal forfeiture case. See 18 U.S.C. 
§ 1963(1) (3); CFRA, § 16(d). 

Subsection (d) provides that the claimant has the threshold 
burden of establishing his or her standing to contest the 
forfeiture action. The standing provision parallels the standing 
provision for third parties challenging criminal forfeitures. 
See 18 U.S.C. § 1963 (1) (2) ; United StaTgS" v. BCCI Holdings 
(Luxembourg) S.A. . 833 F. Supp. 9 (D.D.C. 1993), aff'd 46 F.3d 
1185 (D.C. Cir. 1995) . Under that rule, the claimant must 
establish that he has an ownership interest in the property, 
including a lien, mortgage, recorded security device or valid 
assignment of an ownership interest. In other words, for stand- 
ing purposes a claimant must establish the same ownership inter- 
est he or she must establish to assert an innocent ownership 
defense under the uniform innocent owner statute, 18 U.S.C. 
§ 983 . General creditors of the property owner do not have 
standing, see BCCI Holdings , supra , nor do nominees who exercise 
no dominion and control over the property, see United States v. 
One 1990 Chevrolet Corvette . 37 F.3d 421 (8th Cir. 1994) . To the 
extent that some courts have found standing based on mere 
possession, those cases are overruled by the new statute. See, 
e.g. . United States v. $191.910.00 in U.S. Currency . 16 F.3d 1051 

(9th Cir. 1994) (holding that it is sufficient for standing 
purposes for claimant to assert that he is holding money for a 

friend) . 

The statutes also creates a mechanism for litigating 
standing issues pre-trial. In the pre-trial standing hearing, 
the government has the burden of challenging the claimant's 
standing in the first instance, and the claimant has the ultimate 



55 



burden to establish standing once the issue has been raised. The 
pre-trial hearing is intended only to resolve the standing 
issues, and is not intended to be a mini-trial in which the 
government's case- in-chief and the claimant's affirmative 
defenses are litigated. 

Subsection (e) follows the model state rule in placing the 
burden on the government to prove by a preponderance of the 
evidence that the property is subject to forfeiture, and in 
placing the burden on the claimant, by the same standard, to 
prove an affirmative defense. See CFRA, § 16(g) . This is a 
major change from current law which places the burden of proof on 
the claimant on both issues. See 19 U.S.C. § 1615. 

Under current law, a law enforcement officer may seize 
property based on probable cause to believe that the property is 
subject to forfeiture. If, upon publication of the intent to 
forfeit the property and the sending of notice to persons with an 
interest therein, no one files a claim to the property, it may be 
forfeited based on the same showing of probable cause that 
supported the initial seizure. 

If a claim is filed, the U.S. Attorney must file a complaint 
in the district court. At a trial on the forfeiture issues, the 
property is forfeited if the judge or jury finds, by a 
preponderance of the evidence, that the property is subject to 
forfeiture under the applicable statute. The burden of 
establishing that the property is not subject to forfeiture is on 
the person filing the claim. 19 U.S .C._§__1615 . 

Many courts have criticized this latter aspect of forfeiture 
procedure, and have insisted on a presentation of evidence by the 
government at trial that effectively places the burden on the 
government to establish the forf eitability of the property. See 
United States v. $30.600 . 39 F.3d 1039 (9th Cir. 1994); United 
States V. $31.990 in U.S. Currency . 982 F.2d 851 (2d Cir. 1993). 
Accordingly, subsection (e) changes current law to provide that 
the government, not the claimant, bears the burden of proof 
regarding the forf eitability of the property, while the claimant 
retains the burden of proof regarding any affirmative defenses. 

See United States v. One Parcel . . . 194 Quaker Farms Road . 

F.3d , 1996 WL 292036 (2d Cir. Jun. 4, 1996) (claimants 

asserting affirmative innocent owner defenses have "unique access 
to evidence regarding such claims,-" they know what facts were 
brought to their attention and "why facts of which owners are 
generally aware were unknown to them;" accordingly, placing the 
burden of proof on the claimant regarding the affirmative defense 
is appropriate) . While the allocation of the burden of proof 
would change, the standard of proof -- i.e., preponderance of the 
evidence, would remain the same as it is under current law. 



56 



Moreover, the change in the burden of proof would apply only 
to judicial forfeitures; it would have no effect on the seizure 
of property based on probable cause, or the administrative or 
civil forfeiture of the property based solely on the showing of 
probable cause if no one files a timely claim to the property. 

Subsection (e) also specifies that when the government's 
theory of forfeiture is that the property facilitated the 
commission of a criminal offense, see, e.g. 21 U.S.C. 
§§ 881(a)(4) and (7), the government must establish that there 
was a substantial connection between the property and the 
offense. This codifies the majority rule as expressed in United 
States V. One 1986 Ford Pickup . 56 F.3d 1181 (9th Cir. 1995); 
United States v. 1966 Beechcraft Aircraft . 777 F.2d 947, 953 (4th 
Cir. 1985) ; United States v. One 1976 Ford F-150 Pick-Up . 769 
F.2d 525, 527 (8th Cir. 1985); United States v. 1972 Chevrolet 
Corvette . 625 F.2d 1026, 1029 (1st Cir. 1980); and United States 

V. 100 Chadwick Drive . F. Supp. , 1995 WL 786581 (W.D.N. C. 

Nov. 20, 1995) . The Second, Fifth and Seventh Circuits currently 
require a lesser degree of connection between the property and 
the criminal activity underlying the forfeiture. See United 
States V. Daccarett . 6 F.3d 37 (2d Cir. 1993) (gov't must 
demonstrate only a "nexus," not a "substantial connection"); 
United States v. 1990 Toyota 4Runner . 9 F.3d 651, 653-54 (7th 
Cir. 1993) ; United States v. 1964 Beechcraft Baron Aircraft . 691 
F.2d 725, 727 (5th Cir. 1982) . 

Subsection (f) requires claimants to set forth all 
affirmative defenses in the initial pleadings. This is 
consistent with Rule 8(c) and other provisions of the Fed. R. 
Civ. P. which require a party to assert his or her affirmative 
defenses in the initial pleadings and to submit to discovery on 
those matters pre-trial. The balance of the subsection is 
intended only to make clear that once trial has commenced, a 
claimant will not be required to assume either the burden of 
proof regarding an affirmative defense or the burden of 
production of evidence until the government has establish a prima 
facie case in its case-in-chief. 

Subsection (g) establishes rules regarding motions to 
suppress seized evidence. It recognizes that a claimant must be 
afforded some remedy if the government's initial seizure of the 
property was illegal for lack of probable cause and the claimant 
has standing to object to the 4th Amendment violation. See 
Rawlings v. Kentucky . 448 U.S. 98 (1980) . The statute codifies 
the general rule that the remedy in such cases is the suppression 
of the illegally seized evidence. In such cases, civil 
forfeiture law is analogous to the criminal law which provides 
for the suppression of illegally seized evidence while permitting 
the government to go forward with its case based on other 
admissible evidence. See United States v. $7,850.00 i n U.S. 
Currency . 7 F.3d 1355 (8th Cir. 1993); United States v. A Parcel 

10 



57 



of Land (92 Buena Vista) . 937 F.2d 98 {3rd Cir. 1991), aff'd on 
separate issue 113 S. Ct . 1126 (1993); United States v. Premises 
and Real Property at 4492 S. Livonia Rd. . 889 F.2d 1258, 1268 (2d 
Cir. 1989) ; United States v. $67.220.00 in United States 
Currency . 957 F.2d 280, 284 {6th Cir. 1992); United States v. 155 
Bemis Road . 760 F. Supp. 245, 251 (D.N.H. 1991); United States v. 
Certain Real Property Located on Hanson Brook . 770 F. Supp. 722, 
730 (D. Me. 1991); United States v. $633.021.67 in U.S. Currency . 
842 F. Supp. 528 {N.D. Ga . 1993) . 

Outside of the context of a motion to suppress, the claimant 
has no right to any preliminary hearing on the status of the 
government's evidence, nor any right to move to dismiss a case 
for lack of evidence pre-trial. Pre-trial dispositive motions 
are limited to those based on defects in the pleadings, as set 
forth in Rule 12 of the Federal Rules of Civil Procedure. A 
claimant may, of course, move for the entry of summary judgment 
pursuant to Rule 56, Fed. R. Civ. P., once discovery is complete. 

Subsection (h) authorizes the use of hearsay at pre-trial 
hearings. This is consistent with the present rule regarding 
criminal forfeitures. See 18 U.S.C. § 1963(d)(3) permitting 
hearsay to be considered in pre-trial hearings in criminal 
forfeiture cases. The statute also codifies McCray v. Illinois . 
386 U.S. 300 (1967) (in pre-trial motion to suppress, informer's 
identity need not be revealed in a pre-trial hearing if the 
government can establish, through another person's testimony, 
that the informer is reliable and the information credible) , and 
makes it applicable to all pre-trial he<H*ings in civil forfeiture 
cases. The term "hearing" means either an oral hearing or a 
determination on written papers, as provided in Rule 43(e), 
Federal Rules of Civil Procedure. Hearsay will not be admissible 
at trial except as provided in the Federal Rules of Evidence. 

Subsection (i) gives the government the benefit of certain 
adverse inferences when the claimant invokes the Fifth Amendment 
at trial or during the discovery phase of a forfeiture case. 
This is consistent with current case law regarding adverse 
inferences, see Baxter v. Palmiaiano . 425 U.S. 308, 318 (1976); 
United States v. lanniello . 824 F.2d 203, 208 (2d Cir. 1987); 
United States v. A Single Family Residence . 803 F.2d 625, 629 n.4 
(11th Cir. 1986); United States v. $75.040.00 in U.S. Currency . 
785 F. Supp. 1423, 1429 (D. Or. 1991); but see United States v. 
Real Property (Box 137-B) . 24 F.3d 845 (6t:h Cir. 1994), and is 
necessary, given the government's burden of proof, to prevent 
claimants from defeating forfeiture by refusing to reveal the 
source of property or its nexus to a criminal offense. See 
United States v. Certain Real Property . . ■ 4003-4005 5th 
Avenue . 55 F.3d 78 (2d Cir. 1995) ("If it appears that a litigant 
has sought to use the Fifth Amendment to abuse or obstruct the 
discovery process, trial courts, to prevent prejudice to opposing 
parties, may adopt remedial procedures or impose sanctions."). 

11 



58 



Also consistent with current law, the provision precludes the 
government from relying solely on the adverse inference to 
establish its burden of proof. LaSalle Bank Lake View v. 
Sequban , 54 F.3d 387 (7th Cir. 1995). 

Subsection (j), relating to stipulations, ensures that the 
government will have an opportunity to present the facts 
underlying the forfeiture action to the jury so that the jury 
understands the context of the case even if the claimant concedes 
forfeitability and relies exclusively on an affirmative defense. 

Subsection (k) is taken directly from Section 15(b) of CFRA. 
It authorizes the court to take whatever action may be necessary 
to preserve the availability of property for forfeiture. 
Although not limited to such instances, it will apply mainly in 
cases where the government has not seized the subject property in 
advance of trial. See United States v. James Daniel Good 
Property . 114 S. Ct . 492 (1993) (government need not seize real 
property, but may use restraining orders to preserve its 
availability at trial) . 

Subsection (1) is also derived from CFRA. See § 15(f). It 
authorizes the court to make a pre-trial determination of whether 
probable cause exists to continue to hold property for trial in a 
civil forfeiture case where the claimant alleges that the 
property is needed to pay the costs of his or her defense in a 
criminal case. The court will be called upon to make such a pre- 
trial determination only where the defendant establishes that he 
has no other funds available to hire cjHHninal defense counsel. 
All of this is consistent with existing case law. See United 
States V. Michelle's Lounge . 39 F.3d 684 (7th Cir. 1994) . In 
addition, the statute provides that in determining whether the 
government has probable cause for the forfeiture, the court may 
not consider any affirmative defenses. Such a rule is necessary 
to prevent the pre-trial probable cause hearing from turning into 
a rehearsal of the criminal case which is what would happen if 
the defendant were permitted to assert that he was an innocent 
owner of the property and the government was required to rebut 
that assertion. 

If the court determines that probable cause does exist for 
the forfeiture, the property will remain subject to forfeiture 
notwithstanding the claimant's criminal defense costs. See 
United States v. Monsanto . 491 U.S. 600 (1989) . But if the court 
determines that there is no probable cause for the forfeiture of 
particular assets, it is required to release those assets to the 
claimant . 

Subsection (m) provides that Eighth Amendment issues are to 
be resolved by the court alone following return of the verdict of 
forfeiture . 



12 



59 



The appropriate procedure for determining Eighth Amendment 
issues has confused the courts and litigants since the Supreme 

Court decided Austin v. United States . U.S. , 113 S. Ct . 

2801 (1993) and Alexander v. United States . U.S. , 113 S. 

Ct . 2766 (1993) (holding that Excessive Fines Clause of the 
Eighth Amendments may apply to civil and criminal forfeitures 
respectively). See , e.g., United States v. Premises Known as RR 
#1 . 14 F.3d 864, 876 (3d Cir. 1994) (noting that "neither Austin 
nor Alexander addresses the question of whether judge or jury 
decides if a civil forfeiture is excessive" and suggesting that 
in view of the "present uncertainty of the law, " the issue be 
submitted to the jury by special interrogatory and that the 
answer be treated as "non-binding" on the court) . 

The subsection provides that the Eighth Amendment determina- 
tion is to be made after return of the verdict of forfeiture. 
This is consistent with cases holding that the Eighth Amendment's 
guarantee against Cruel and Unusual Punishment does not apply 
until after a verdict of guilt is returned. See Hewitt v. City 
of Truth or Consequences . 758 F.2d 1375, 1377 n.2 (10th Cir.), 
cert . denied . 474 U.S. 844 (1985) ("The Eighth Amendment does not 
apply until after an adjudication of guilt"); see also Ingraham 
V. Wright . 430 U.S. 651, 671-72 n.40, 97 S. Ct . 1401, 1412-13 
n.40 (1977) . It also makes sense because it is premature to mal<e 
excessiveness determination before the court determines if, and 
to what extent, property is forfeitable. United States v. One 
Parcel . . . 13143 S.W. 15th Lane . 872 F. Supp. 968 (S.D. Fla. 
1994) ; United States v. $633.021.67 in U.S. Currency . 842 F. 
Supp. 528 (N.D. Ga. 1993) (denying pre -tria l motion to dismiss on 
excessiveness grounds) . 

The subsection also provides that Eighth Amendment determi- 
nations are to be made by the court alone and not by the jury. 
Again, there has been some confusion in the case law on this 
issue. The Supreme Court has recognized that the right to a jury 
trial extends only to factual determinations of guilt or inno- 
cence. Eighth Amendment determinations, by contrast, are made 
by the court alone, ^ geivarally after the jury has been dis- 
charged. This is consistent with the view that constitutional 



^ Cabana v. Bullock . 474 U.S. 376, 384 (1986) . 

^ Id. . 474 U.S. at 697 (determinations of whether Eighth 
Amendment has been violated "has long been viewed as one that a 
trial judge or an appellate court is fully competent to make" and 
the violation "can be remedied by any court that has the power to 
find the facts and vacate the sentence") . See also Electro 
Services, Inc. v. Exide Corp. . 847 F.2d 1524, 1530-31 (11th Cir. 
1988) (dictum: "we believe an appropriate test would be whether 
the award is so large as to shock the judicial con- 
science" (emphasis added) . 

13 



60 



issues generally present questions of law for resolution by the 
court . 

Finally, the subsection provides that, where an Eighth 
Amendment violation is found, the court should adjust the forfei- 
ture so as to meet constitutional standards. Again, this provi- 
sion is consistent with Eighth Amendment case law. See United 
States v. Sarbello . 985 F.2d 716, 718 (3d Cir. 1993) ("We hold 
that the court may reduce the statutory penalty in order to 
conform to the eighth amendment"); United States v. Busher . 817 
F.2d 1409, 1415 (9th Cir. 1987); United States v. Bieri . 21 F.3d 
819 (8th Cir. 1994); United States v. Chandler . 36 F.3d 358 {4th 
Cir. 1994) . 

This subsection is purely procedural in nature. It is not 
intended to define any standard upon which the excessiveness 
determination under Austin is to be made nor does it expand the 
remedies available to the claimant beyond those required by the 
Eighth Amendment. 

Subsection (n) provides that the procedures set forth in the 
new statute will apply to all civil judicial forfeitures under 
title 18, the Controlled Substances Act and the Immigration and 
Naturalization Act. It will not apply to customs forfeitures or 
other forfeitures undertaken by the U.S. Customs Service except 
those pursuant to offenses codified in titles 8, 18 and 21 of the 
U.S. Code. 

Subsection (o) provides that a civti— forfeiture action does 
not abate because of the death of any person. Notwithstanding 
recent decisions of the Supreme Court holding that civil 
forfeitures may be considered punitive for certain constitutional 
purposes, a civil forfeiture is in rem in nature; therefore the 
death of a person who did or could have filed a claim to the 
property is irrelevant to the governm.ent ' s right to forfeit the 
property. This provision clarifies any confusion that might 
exist in the law on this point. See United States v. One Hundred 
Twenty Thousand Seven Hundred Fiftv One Dollars ($120.751.00) in 
United States Currency . Civ. No. 4:94CV 2235 LOD (E.D. Mo. Oct. 
30, 1995) (dismissing forfeiture action against drug proceeds 
under 21 U.S.C. § 881(a) (6) on the theory that the forfeiture was 
punitive in nature and accordingly abated when the drug 
trafficker from whom the proceeds were seized was murdered) . 



^ Ouick V. Jones . 754 F.2d 1521, 1523 (9th Cir. 1984) (ques- 
tion of what process is due is a question of law) ; Burris v. 
Willis Independent School District . 713 F.2d 1087, 1094 (1983) 
("The question of whether specific conduct or speech is protected 
by the first amendment is ultimately a question of law") . 



14 



61 



The balance of this section establishes certain rebuttable 
presumptions intended to assist the government in meeting its 
burden of proof in certain dirug and money laundering cases. Most 
important, the section establishes rebuttable presumptions 
applicable to money laundering forfeitures for violations of 18 
U.S.C. § 1956 and 1957 which frequently involve sophisticated 
efforts to transfer, by wire or other means, large sums of money 
through shell corporations or bank secrecy jurisdictions in a 
manner calculated to avoid detection. In such cases, a 
rebuttable presumption is particularly necessary to allow the 
government to overcome the efforts made to obscure the true 
nature of the transaction and to force the claimant to come 
forward with evidence regarding the source of the money. The 
definition of "shell corporation" is taken from Financial Action 
Task Force recommendation 13 which defines "domiciliary compa- 
nies, " a diplomatic term for shell corporations. 

A presumption will also i.pply to the forfeiture of the 
proceeds of foreign drug offenses under 18 U.S.C. § 981(a) (1) (B) . 

Section 122 Time for Filing Claim and Answer 

This section expands the time limit for filing a claim in a 
judicial proceeding. Current law requires the claimant to file 
the claim within 10 days of the ■ service of the arrest warrant in 
rem on the property. Because the claimant frequently has no 
notice of the arrest of the property, starting the 10 day period 
from the date of the arrest can impose an undue hardship. Rule C 
of the Admiralty Rules is therefore ame«4ed- to start the time 
period for filing a claim from the date of the receipt of actual 
notice of the arrest, or the last date of publication of the 
arrest pursuant to Rule C(4), whichever is earlier, and to extend 
the time from 10 days to 20 days. The Admiralty Rule will apply 
in civil forfeiture cases notwithstanding the provisions in the 
1993 amendments to Rule 4 . 1 of the Federal Rules of Civil 
Procedure. 

Section 123 Uniform Innocent Owner Defense 

The Constitution does not require any protection for 
innocent owners in civil forfeiture statutes. Bennis v. 

Michigan . 116 S. Ct . , 1996 WL 88269 (Mar. 4, 1996). Because 

civil forfeitures are directed against the property and not 
against the property owner, the property may be forfeited whether 
the owner was aware of, or consented to, the illegal use of the 
property or not . Id. 

Congress, however, can afford property owners greater 
protection than the Constitution requires. Since 1984, Congress 
has included innocent owner provisions in the most commonly used 
civil forfeiture statutes. See 21 U.S.C. § 881 (a) (4) , (6) (7) ; 18 
U.S.C. § 981(a)(2). Moreover, the Department of Justice, as a 

15 



35-668 96-3 



62 



matter of policy, does not seek to forfeiture property belonging 
to innocent owners. See Policy Directive 92-8 (1992). 

Nevertheless, the law in this area remains confused. The 
innocent owner provisions in the drug and money laundering 
statutes are inconsistent with each other, and many forfeiture 
statutes contain no innocent owner provision. For example, 
§ 881(a)(4) (forfeiture of vehicles used to transport drugs), 
protects an owner whose property was used without his ")<nowledge, 
consent or willful blindness." Sections 881(a)(6) (drug 
proceeds) and 881(a)(7) (real property facilitating drug 
offenses) , on the other hand, contain no willful blindness 
requirement; they protect those who demonstrate laclc of 
"knowledge or consent." And 18 U.S.C. § 981(a)(2) (property 
involved in money laundering) , requires only a showing of lack of 
"knowledge." The forfeiture statute for gambling offenses, 18 
U.S.C. § 1955(d), contains no innocent owner defense at all. 

The courts also differ as to what these defenses mean. The 
Ninth Circuit interprets "knowledge or consent" to mean that a 
person must prove that he or she did not have knowledge of the 
criminal offense and did not consent to that offense. See United 
States V. One Parcel of Land , 902 F.2d 1443, 1445 (9th Cir. 1990) 
("knowledge" and "consent" are conjunctive terms, and claimant 
must prove lack of both) . Thus, in the Ninth Circuit, a wife who 
knows that her husband is using her property to commit a criminal 
offense cannot defeat the forfeiture of that property even if she 
did not consent to the illegal use. But the Second, Third and 
Eleventh Circuits hold that a person whrr-iras knowledge that his 
property is being used for an illegal purpose may nevertheless 
avoid forfeiture if he shows that he did not consent to that use 
of his property. See United States v. 141st Street Corp. , 911 
F.2d 870, 877-78 (2nd Cir. 1990) (landlord who knew building was 
being used for drug trafficking had opportunity to show he did 
not consent to such use), cert, denied . Ill S. Ct . 1017 (1991); 
United States v. Parcel of Real Property Known as 6109 Grubb 
Road . 886 F.2d 618, 626 (3rd Cir. 1989) (wife who knew of 
husband's use of residence for drug trafficking had opportunity 
to show she did not consent to such use) ; United States v. One 
Parcel of Real Estate at 1012 Germantown Road , 963 F.2d 1496 
(11th Cir. 1992) . 

The rule is entirely different for money laundering and bank 
fraud cases. Because § 981(a)(2) lacks a "consent" requirement 
and contains only a "lack of knowledge" requirement, there is no 
burden on the claimant to show that he or she took any steps at 
all to avoid the illegal activity. Lack of knowledge alone is 

sufficient. United States v. Real Property 874 Cartel Drive. 

F.3d , 1996 WL 125533 (9th Cir. Mar. 22, 1996) (per curiam) 

(because § 981(a) (2) does not contain a consent prong, "all 
reasonable steps" test does not apply) ; United States v. 
$705.270.00 in U.S. Currency . 820 F. Supp. 1398, 1402 (S.D. Fla. 

16 



63 



1993); United States v. Eleven Vehicles . 836 F. Supp. 1147, 1160 
n.l6 {E.D. Pa. 1993); but see United States v. All Monies . 754 F. 
Supp. 1467, 1478 (D. Haw. 1991) (claimant must prove "that he did 
not know of the illegal activity, did not willfully blind himself 
from the illegal activity, and did all that reasonably could be 
expected to prevent the illegal use" of his property) ; United 
States v. All Funds Presently on Deposit at American Express 
Bank . 832 F. Supp. 542 (E.D.N.Y. 1993) (same) . 

The courts are also divided with respect to the application 
of the innocent owner defense to property acquired after the 
crime giving rise to the forfeiture occurred. In the Eleventh 
Circuit, a person who acquires property knowing that it was used 
to commit an illegal act is not an innocent owner. United States 
v. One Parcel of Real Estate Located at 6640 SW 48th Street . 41 
F.3d 1448 (11th Cir. 1995) (lawyer who acquires interest in 
forfeitable property as his fee is not an innocent owner) . But 
in the Third Circuit, the rule is the opposite: a person who 
knowingly acquires forfeitable property is considered an innocent 
owner because he could not have consented to the illegal use of 
the property before he owned it. See United States v. One 1973 
Rolls Rovce . 43 F.3d 794 (3d Cir. 1994). 

In the Rolls Rovce case, the court said that if its decision 
left the innocent owner statute in "a mess, " the problem 
"originated in Congress when it failed to draft a statute that 
takes into account the substantial differences between those 
owners who own the property during the improper use and some of 
those who acquire it afterwards." The cou rt concluded, "Congress 
should redraft the statute if it desires a different result." 

In United States v. A Parcel of Land (92 Buena Vista Ave.) . 
113 S. Ct. 1126 (1993), the Supreme Court identified another 
loophole in the statute as it applies to persons who acquire the 
property after it is used to commit an illegal act. Because, 
unlike its criminal forfeiture counterpart, 21 U.S.C. 
§ 853 (n) (6) (B) , the civil statute does not limit the innocent 
owner defense to persons who purchase the property in good faith, 
it applies to innocent donees. Justice Kennedy, in a dissenting 
opinion, noted that this allows drug dealers to shield their 
property from forfeiture through transfers to relatives or other 
innocent persons. The ruling. Justice Kennedy said, "rips out 
the most effective enforcement provisions in all of the drug 
forfeiture laws," 113 S. Ct . at 1146, and "leaves the forfeiture 
scheme that is the centerpiece of the Nation's drug enforcement 
laws in quite a mess." 113 S. Ct . at 1145 (Kennedy, J. 
dissenting). Justice Stevens, however, writing for the 
plurality, said that the Court was bound by the statutory 
language enacted by Congress. "That a statutory provision 
contains 'puzzling' language, or seems unwise, is not an 
appropriate reason for simply ignoring the text." 113 S. Ct . at 
1135, n.20. 

17 



64 



Finally, there is widespread confusion among the courts with 
respect to the standard that should be used to determine if a 
person had "knowledge" of or "consented" to the illegal use of 
his or her property. Some courts equate "knowledge" with 
"willful blindness" so that a person who willfully blinds himself 
to the illegal use of his property is considered to have had 
knowledge of the illegal act. See Rolls Rovce . supra . But other 
courts allow a person to show lack of knowledge by showing a lack 
of actual knowledge. See United States v. Lots 12, 13. 14 and 
15 . 869 F.2d 942, 946-47 {6th Cir. 1989) . Most courts focus on 
the "consent" prong of the defense, and hold that the property 
owner must "take every reasonable step, and do all that 
reasonably can be done, to prevent the illegal activity" in order 
to be considered an innocent owner. See United States v. 141st 
Street Corp. . 911 F.2d 870 (2d Cir. 1990); United States v. One 
Parcel of Real Estate at 1012 Germantown Road . 963 F.2d 1496 
(11th Cir. 1992) ; United States v. One Parcel of Property (755 
Forest Road) . 985 F.2d 70 (2d Cir. 1993); United States v. 5.382 
Acres . 871 F. Supp. 880 (W.D. Va . 1994) ("Property owners are re- 
quired to meet a significant burden in proving lack of consent 
for they must remain accountable for the use of their property: 
Unless an owner with knowledge can prove every action, reasonable 
under the circumstances, was taken to curtail drug-related 
activity, consent is inferred and the property is subject to 
forfeiture . ") . 

To remedy the inconsistencies in the statutes, and to ensure 
that innocent owners are protected under all forfeiture statutes 
in the federal criminal code, the Justi«€-^epartment has proposed 
a Uniform Innocent Owner Defense to be codified at 18 U.S.C. 
§ 983.^ It applies to all civil forfeitures in titles 8, 18 and 
21 and it may be incorporated into other forfeiture statutes as 
Congress may see fit. Thus, there will no longer be civil 
forfeiture provisions lacking statutory protection for innocent 
owners . 

Second, the new statute will have two parts dealing 
respectively with property owned at the time of the illegal 
offense, and property acquired afterward. In the first category, 
property owners will be able to defeat forfeiture in two ways: 1) 
by showing that they lacked knowledge of the offense, or 2) that 
upon learning of the illegal use of the property, they "did all 
that reasonably could be expected to terminate such use of the 



^ For a detailed discussion of all of these issues, and a 
legislative proposal similar to the one in this bill, see Franze, 
"Note: Casualties of War?: Drugs, Civil Forfeiture, and the 
Plight of the 'Innocent Owner,'" The Notre Dame Law Review, Vol. 
70, Issue 2 (1994) 369-413. See also Cassella, "Forfeiture 
Reform: A View from the Justice Department," Journal of 
Legislation, Notre Dame Law School, 21:2 (1995). 

18 



65 



property." Thus, as the majority of courts now hold, under the 
second defense a spouse could defeat forfeiture of her property, 
even if she knew that it was being used illegally, by showing 
that she did everything that a reasonable person in her 
circumstances would have done to prevent the illegal use. 

Under the first defense, a showing of a lack of knowledge 
would be a complete defense to forfeiture. But to show lack of 
knowledge, the owner would have to show that he was not willfully 
blind to the illegal use of the property. This means that if the 
government establishes the existence of facts and circumstances 
that should have created a reasonable suspicion that the property 
was being or would be used for an illegal purpose, the owner 
would have to show that he did all that reasonably could be 
expected in light of such circumstances to prevent the illegal 
use of the property. See United States v. Property Titled in the 
Names of Ponce . 751 F. Supp. 1436, 1440 n.3 (D. Haw. 1990) 
(claimant must show that he did not consent in advance to illegal 
use of his property even if he proves that he did not actually 
know whether such illegal use ever occurred) . 

The statute employs a different formulation of the innocent 
owner defense in cases involving property acquired after the 
offense giving rise to the forfeiture. This is necessarily so, 
because in such cases, the critical issue concerns what the 
property owner knew or should have known at the time he acquired 
the property, not what he knew when the crime occurred. 664 SW 
48th Street , supra . So, in the case of after-acquired property, 
a person would be considered an innocenT~~Dwner if he establishes 
that he acquired the property as a bona fide purchaser for value 
who at the time of the purchase did not know and was reasonably 
without cause to believe that the property was subject to 
forfeiture. This means that a purchaser is an innocent owner if 
in light of the circumstances surrounding the purchase he did all 
that a person would be expected to do to ensure that he was not 
acquiring property that was subject to forfeiture. 

This provision will be of particular importance is cases 
involving the acquisition of drug dollars on the black market in 
South America. In such cases, wealthy persons assist in the 
laundering of the drug money by purchasing U.S. dollars, or 
dollar-denominated instruments and send the money to the United 
States while maintaining ignorance of its source. See United . 
States V. All Monies . 754 F. Supp. 1467 (D. Haw. 1991); United 
States V. Funds Seized From Account Number 20548408 at Bavbank. 
N.A. . 1995 WL 381659 (D. Mass. Jun . 16, 1995) (unpublished) . The 
new statute would put the burden on such individuals to show that 
they took all reasonable steps to ensure that they were not 
acquiring drug proceeds. 

Limiting the innocent owner defense to "purchasers" in this 
circumstance tracks the language of the criminal innocent owner 

19 



66 



defense, 21 U.S.C. § 853 (n) (6) (B) , and eliminates the problem 
identified by Justice Kennedy in 92 Buena Vista . 

The remainder of the new statute addresses a number of other 
concerns that have arisen in the courts under the current law. 
First, the statute makes clear that under no circumstances may a 
person other than a bona fide purchaser be considered an innocent 
owner of criminal proceeds. This avoids a situation that arises 
in community property states when a spouse claims title to her 
husband's drug proceeds as marital property. 

The statute also defines "owner" to include lienholders and 
others with secured interests in the subject property, but to 
exclude, consistent with the prevailing view under current law, 
general creditors, bailees, nominees and beneficiaries of 
constructive trusts. See e.g. United States v. One 1990 
Chevrolet Corvette . 37 F.3d 421 {8th Cir. 1994) (titled owner 
lacks standing to contest forfeiture of property over which she 
exercised no dominion or control) ; United States v. BCCI Holdings 

(Luxembourg) S.A. . 46 F.3d 1185 (D.C. Cir. 1995) (general 
creditors and beneficiaries of constructive trusts lack 
sufficient interest in the property to contest forfeiture) ; 
United States v. $3.000 in Cash . F. Supp. , 1995 WL 707879 

(E.D. Va. Nov. 29, 1995) (person who voluntarily transfers his 
property to another is no longer the "owner" and therefore lacks 
standing to contest the forfeiture) . 

The statute also resolves a split in the courts regarding 
the disposition of property jointly ownecl~15y a guilty person and 
an innocent spouse, business partner or co-tenant. The statute 
gives the district court three alternatives: sever the property; 
liquidate the property and order the return a portion of the 
proceeds to the innocent party; or allow the innocent party to 
remain in possession of the property, subject to a lien in favor 
of the government to the extent of the guilty party's interest. 

Finally, the statute contains a rebuttable presumption 
relating to innocent owner defenses raised by financial institu- 
tions that hold liens, mortgages or other secured interests in 
forfeitable property. The provision, which was suggested by 
representatives of the financial community, creates the 
presumption that the institution acted reasonably in acquiring a 
property interest, or it attempting to curtail the illegal use of 
property in which it already held an interest, if the institution 
establishes that it acted in accordance with rigorous internal 
standards adopted to ensure the exercise of due diligence in 
making loans and acquiring property interests, and did not have 
actual notice that the property was subject to forfeiture before 
acquiring its interest. The government could rebut the 
presumption by establishing the existence of facts and 
circumstances that should have put the institution on notice that 
its ordinary procedures were inadequate. 

20 



67 



Section 124 Stay of Civil Forfeiture Case 

This provision is intended to give both the government and 
the claimant in a civil forfeiture case the right to seek a stay 
of the forfeiture proceeding in order to protect a vital interest 
in a related criminal case. 

Current law provides that the filing of a related criminal 
indictment or information shall stay a civil forfeiture proceed- 
ing upon the motion of the government and a showing of "good 
cause." 18 U.S.C. § 981(g); 21 U.S.C. § 881 (i). Numerous courts 
have held that the possibility that the broader civil discovery 
available to a claimant in a civil case will interfere with the 
criminal prosecution constitutes "good cause." See United States 
V. One Single Family Residence Located at 2820 Taft St. . 710 F. 
Supp. 1351, 1352 (S.D. Fla. 1989) (stay granted where "scope of 
civil discovery could interfere with criminal prosecution"); 
United States v. Property at 297 Hawley St. . 727 F. Supp. 90, 91 
(W.D.N.Y. 1990) (good cause requirement satisfied where stay 
necessary to protect criminal case from "potentially" broad 
discovery demands of claimant/defendant) . Other courts have 
required the government to demonstrate some specific harm. See 
United States v. Leasehold Interests in 118 Avenue D . 754 F. 
Supp. 282, 287 (E.D.N.Y. 1990) ("mere conclusory allegations of 
potential abuse or simply the opportunity by the claimant to 
improperly exploit civil discovery . . . will not avail on a 
motion for a stay") . 

Recent cases indicate that courts TSaTance multiple factors 
to determine whether "good cause" justifies a stay requested 
either by the government or by the claimant. See United States v. 
All Funds, Monies, Securities, Mutual Fund Shares and Stocks . 162 
F.R.D. 4 (D. Mass. 1995) (continuation of stay pending criminal 
proceedings denied because rationale behind 21 U.S.C. § 881 (i) to 
avoid abuse of civil discovery did not apply where local civil 
rules required claimant to make disclosures to government before 
conducting discovery and criminal forfeiture counts in related 
indictment enabled government to readily avoid double jeopardy 
concerns); United States v. Section 17 Township , 40 F.3d 320 
(10th Cir. 1994) (no appellate jurisdiction under 28 U.S.C. 
§ 1291 or § 1292(a) (1) to review district court's stay based on 
potential for civil discovery in federal forfeiture action to 
undermine pending state criminal proceedings and interest in 
preservation of claimants' Fifth Amendment privilege against 
self-incrimination) ; United States v. Four Contiguous Parcels . 
864 F. Supp. 652 (W.D. Ky. 1994) (Government did not meet burden 
of showing "good cause" where government could have avoided 
prejudice caused by civil discovery by pursuing criminal 
forfeiture and extension of 18 month delay since seizure raised 
serious due process concerns) ; United States v. Lot 5. Fox Grove . 
23 F.3d 359 (11th Cir. 1994) (claimant's mere blanket assertion 
of Fifth Amendment protection against self incrimination in 

21 



68 



connection with related criminal case insufficient grounds for 
stay); additional factors were claimant's stipulation to probable 
cause, claimant's failure to use the testimony of others to 
defend against forfeiture, and claimant's failure to explain 
prejudice from continuation of forfeiture action; In re Phillips. 
Beckwith & Hall . 896 F.Supp. 553 (E.D.Va. 1995) (denying stay 
requested by attorney/claimant in forfeiture action against drug 
proceeds paid as attorney fees where attorney is also target of 
criminal investigation because stay to accommodate attorney's 
Fifth Amendment rights would prejudice the government's 
forfeiture case) . 

The amendment is intended to give greater guidance to the 
courts by providing specifically that a stay shall be entered 
whenever the court determines that civil discovery may adversely 
affect the ability of the government to investigate or prosecute 
a related criminal case. It also removes a limitation in the law 
that currently provides for a stay only after a criminal 
indictment or information is filed. The reference to "a related 
criminal investigation" recognizes that civil discovery is at 
least as likely to interfere with an on-going undercover 
investigation, the use of court-ordered electronic surveillance, 
or the grand jury's performance of its duties as with the 
government's ability to bring a criminal case to trial. The 
definition of "a related criminal case" and "a related criminal 
investigation" also make clear that the neither the parties nor 
the facts in the civil and criminal cases need be identical for 
the two cases to be considered related. Instead, the sum of 
several factors, which are set forth in— fehe disjunctive, would 
have to indicate that the two cases were substantially the same. 
This is consistent with recent cases holding that a stay was 
authorized under § 881 (i) or § 981(g) even if the claimant in the 
civil case was not one of persons under indictment in the 
criminal case. See United States v. A Parcel of Realty Commonlv 
Known as 4808 South Winchester , No. 88-C-1312, 1988 WL 107346 
(N.D.Ill. Oct. 11, 1988); United States v. All Monies 
($3 .258.694 .54) . No. 89-00382 ACK (D. Hawaii June 6, 1990) . 

The amendment also gives the claimant an equal opportunity 
to seek a stay of the civil case in the appropriate circumstanc- 
es. As mentioned, under current law, only the government may 
seek a stay of the forfeiture proceeding. Under the amendment, 
however, a claimant may obtain a stay if the claimant is able to 
establish that he or she is the subject of an actual, ongoing 
criminal investigation or prosecution, and that denial of a stay 
of the civil forfeiture proceeding would infringe upon the 
claimant's Fifth Amendment rights in the criminal proceeding. 
This provision protects defendants and individuals under criminal 
investigation by a grand jury from having the government use the 
civil forfeiture procedure as a means of forcing the claimant to 
make a "Hobson's Choice" between defending his property in the 
civil case and defending his liberty in the criminal one. See 

22 



69 



United States v. Certain Real Property . . . 4003-4005 srh 
Avenue, 55 F.3d 78 {2d Cir. 1995) (claimant in civil forfeiture 
cases faces the dilemma of remaining silent and allowing the 
forfeiture or testifying against the forfeiture and exposing 
himself to incriminating admissions) ; United States v. Parcels of 
Land (Laliberte) . 903 F.2d 36 (1st Cir.), cert, denied , ill s. 
Ct . 289 (1990) (claimant's insistence on asserting Fifth 
Amendment rights in civil proceeding could result in dismissal of 
claim) . The amendment is consistent with recent cases in which 
the courts have stayed civil forfeiture proceedings in order to 
avoid Fifth Amendment conflicts. See United States v. All Assets 
of Statewide Autoparts. Inc. . 971 F.2d 896 (2d Cir. 1992) ; United 
States V. A Certain Parcel of Land . 781 F. Supp. 830, 833 (D.N.H. 
1992) . 

The provision requires the existence of an actual prosecu- 
tion or investigation, however, to ensure that claimants are not 
able to bring civil forfeiture cases to a standstill on the basis 
of speculation about future criminal exposure. As is true under 
current law, claimants seeking a stay under the revised statute 
could not rely on a blanket assertion of the Fifth Amendment but 
would have to assert with precision how they would be prejudiced 
if the civil action went forward. See United St a tes v. Lot 5 . 23 
F.3d 359 (11th Cir. 1994); United States v. Certain Real Property 
566 Hendrickson Boulevard . 986 F.2d 990, 997 (6th Cir. 1993). 

The provision also requires a claimant to establish that he 
or she has standing to contest the forfeiture before a stay may 
be entered at the claimant's request. Bvun - if the court deter- 
mines that the claimant has standing for this purpose, that 
determination will not be binding on the court should the govern- 
ment later object to the claimant's standing pretrial as provided 
elsewhere in the Act. The intended effect of this provision is 
to permit the government to consent to a stay without risk of 
being estopped from objecting to the claimant's standing once the 
stay is lifted. 

Some courts in the past have attempted to ameliorate the 
burden on the claimant who is simultaneously the subject of a 
criminal proceeding by entering a protective order limiting 
discovery. See Laliberte . 903 F.2d at 44-45. Under the amend- 
ment, a court could still take this course. The amendment 
recognizes, however, the unfairness of limiting one party's right 
to take discovery while allowing the other party free rein. In 
cases where such unfairness would result, it is preferable that 
the court simply stay the civil case. See United States v. A 
Certain Parcel of Property (155 Bemis Road) . Civ. No. 90-424-D 
(D.N.H. May 8, 1992) (entering stay of civil forfeiture case 
after attempts to protect Fifth Amendment rights with protective 
order proved unworkable as claimant continued to seek discovery 
from the government while government was limited in ability to 
take discovery from claimant) . Thus, if the effect of the 

23 



70 



protective order were, for example, to enable the government to 
obtain little of value from a claimant in discovery while the 
claimant was able to review the government's files and depose its 
witnesses, the statute would require that a stay be imposed 
instead. 

Finally, the amendment provides that the Attorney General 
and the Secretary of the Treasury must promulgate guidelines 
governing the preservation of the property subject to forfeiture 
while the case is stayed. This provision takes into account the 
interest of both the government and the property owner in ensur- 
ing that the property in question is not subject to vandalism, 
lack of maintenance, fire damage, mismanagement, depreciation 
through excessive use or other reduction in value before the 
forfeiture action is concluded. 

The guidelines would necessarily require different measures 
to be taken for different types of real and personal property. 
For example, a vehicle might have to be held in storage to ensure 
that it was available for forfeiture. But where the property in 
question is an on-going business, a lease-back or occupancy 
arrangement between the government and claimant might be suffi- 
cient to guarantee the availability of the business for forfei- 
ture once the stay is removed while allowing the claimant the 
opportunity to preserve the value of his or her property in the 
meantime. In this way, the guidelines would address the concerns 
of those courts that have denied the government's request for a 
stay where it would have an adverse effect on an on-going busi- 
ness and where less drastic means existed" to preserve the value 
of the property. See United States v. All Right, Title and 
Interest in Real Property (228 Blair Ave.) . 821 F. Supp. 893 
(S.D.N.Y. 1993) . 

The revised statute would also provide that the Court should 
enter any order necessary to preserve the value of the property 
while the stay was in effect. This would include an order 
requiring that mortgage payments should continue to be made in 
order to protect the rights of third party lienholders, tenants, 
and other innocent persons. Id. 

Section 125 Application of Forfeiture Procedures 

Chapter 46 of title 18 comprises a number of statutes 
describing the procedures applicable to civil and criminal 
forfeiture cases. For example. Sections 981(b) through (j) 
contain procedures relating to pre-trial seizure, disbursement of 
forfeited property, extended venue and pre-trial stays. Sections 
984 and 986 contain procedures relating to fungible property and 
the subpoenas for bank records. Moreover, this Act adds Sections 
983, 985 and 987 relating to a uniform innocent owner defense, 
administrative subpoenas and trial procedure in civil forfeiture 

24 



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cases. Finally, Section 982 contains procedures governing 
criminal forfeitures. 

The intent of the Act is to make these procedures applicable 
to all civil and criminal forfeitures authorized by a statute in 
Title 18, United States Code. Some of the procedures, by their 
own terms, would already apply to all Title 18 forfeitures, as 
well as forfeitures brought under other statutes. See e.g. 
Section 983, applying the uniform innocent owner defense to all 
civil forfeitures in title 18, the Controlled Substances Act and 
the Immigration and Naturalization Act. Other provisions, 
however, either contain no provision regarding the scope of their 
application or presently apply only to forfeitures under §§ 981 
and 982. 

Moreover, there are many older civil forfeiture procedures 
scattered throughout Title 18 that contain no procedural provi- 
sions at all or that incorporate the customs laws but not the 
procedures in Chapter 46. See e.g. 18 U.S.C. §§ 492, 512, 544- 
45, 548, 962-69, 981, 1165, 1762, 1955, 2274 and 2513.^ The 
same is true for a smaller number of criminal forfeiture stat- , 
utes. See e.g. 18 U.S.C. § 1082. This section fills in any gaps 
and makes the provisions in Chapter 46 applicable to other civil 
and criminal forfeiture statutes, respectively. Because Section 
981(d) incorporates the customs laws, the application of all 
Chapter 46 procedures to other forfeiture statutes will make the 
customs laws applicable to those statutes as well. 

This provision would not, however, ""Override any specific 
forfeiture procedures set forth or incorporated in any forfeiture 
statute that are inconsistent with the provisions of Chapter 46. 
Therefore, for example, the provisions of the pornography stat- 
utes, 18 U.S.C. §§ 1467 and 2254-55, that are unique to the 
pornography laws would not be affected by this provision. 
Similarly, the provisions of 31 U.S.C. § 9703 (o) that already 
make the customs laws applicable to Title 18 cases within the 
jurisdiction of the Bureau of Alcohol, Tobacco and Firearms would 
not be affected by this section. 

Subtitle C -- Seizures and Investigations 

Section 131 Seizure Warrant Requirement 

This section simplifies and clarifies the government's 
authority to seize property for forfeiture. First, 18 U.S.C. 
§ 981(b) (1) is amended to update the authority of the Attorney 
General, and in appropriate cases the Secretary of the Treasury 
and the Postal Service, to seize forfeitable property. This 



^ Some of these statutes are amended in this Act to correct 
this omission, e.g. 18 U.S.C. § 492. 

25 



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section was last amended in 1989 before paragraphs (D) , (E) and 
(F) were added to § 981(a) (1). Absent this amendment, the 
seizure warrant authority for property forfeitable under those 
provisions is unclear. Otherwise, the amendment is not meant to 
alter the investigative authority of the respective agencies. 

Subsection (b) (2) is revised to provide that a seizure 
warrant is obtained "in the same manner" as provided in the Rules 
of Criminal Procedure, not "pursuant to" those Rules which, of 
course, do not apply to civil forfeitures. See Rule 54(b) (5) . 
Subsection (b) (2) also conforms § 981(b) to the current version 
of 21 U.S.C. § 881(b) (the parallel seizure statute for drug 
forfeitures) by authorizing warrantless seizures in cases where 
an exception to the Fourth Amendment warrant requirement would 
apply. For example, in § 881 cases, courts have approved 
warrantless seizures in cases where there is probable cause for 
the seizure but exigent circumstances preclude obtaining a 
seizure warrant. See United States v. Daccarett , 6 F.3d 37 (2d 
Cir. 1993) . See also United States v. Dixon . 1 F.3d 1080 (10th 
Cir. 1993) (warrantless seizure under § 881(b) (4) upheld where 
plain view exception applies). The amendment to § 981(b) is 
necessary because such circumstances occur frequently in money 
laundering cases involving electronic funds transfers. 

The remaining subsections are new provisions. The first, to 
be codified as § 981(b) (3), makes clear that the seizure warrant 
may be issued by a judge or magistrate judge in any district in 
which it would be proper to file civil forfeiture complaint 
against the property to be seized, eveTT'Hthe property is 
located, and the seizure is to occur, in another district. 
Previously, there was no ambiguity in the statute, since in rem 
actions could only be filed in the district in which the property 
was located. In 1992, however. Congress amended 28 U.S.C. § 1355 
to provide for in rem jurisdiction in the district in which the 
criminal acts giving rise to the forfeiture took place, and to 
provide for nationwide service of process so that the court in 
which the civil action was filed could bring the subject property 
within the control of the court. See 28 U.S.C. § 1355(d). In 
accord with this new statute, the amendment makes clear that it 
is not necessary for the government to obtain a seizure warrant 
from a judge or magistrate judge in the district where the 
property is located, but rather that it may obtain such process 
from the court that will be responsible for the civil case once 
the property is seized and the complaint is filed. Any motion 
for the return of seized property filed pursuant to Rule 41(e) 
will have to be filed in the district where the seizure warrant 
was issued so that judges and prosecutors in other districts are 
not required to deal with warrants involving property unrelated 
to any case or investigation pending in the district. 

The second new provision, to be codified as § 981(b) (4), 
clarifies the requirement that the government promptly institute 

26 



73 



forfeiture proceedings once property is seized. It provides that 
either civil or criminal proceedings may be instituted. Without 
the amendment, the statute appears to require the government to 
initiate an administrative forfeiture even if the same property 
is subject to forfeiture in a criminal indictment. Such 
unnecessary duplication was never the intent of the legislation. 
As is true with respect to the filing of a civil complaint under 
18 U.S.C. § 987, the statute avoids setting a definite time limit 
for instituting forfeiture proceedings because there will be 
cases where the premature filing of a forfeiture action could 
adversely affect an ongoing criminal investigation. In 
particular, it is appropriate for the Attorney General to take 
into account the impact the filing of the civil case might have 
on on-going undercover operations and the disclosure of evidence 
being presented to a grand jury. 

The third new provision, set forth as § 981(b) (5), relates 
to situations where a person has been arrested in a foreign 
country and there is a danger that property subject to forfeiture 
in the United States in connection with the foreign offenses will 
disappear if it is not immediately restrained. In the case of 
foreign arrests, it is possible for the property of the arrested 
person to be transferred out of the United States before U.S. law 
enforcement officials have received from the foreign country the 
evidence necessary to support a finding a probable cause for the 
seizure of the property in accordance with federal law. This 
situation is most likely to arise in the case of drug traffickers 
and money launderers whose bank accounts in the United States may 
be emptied within hours of an arrest by-£or€ign authorities in 
the Latin America or Europe. To ensure that property subject to 
forfeiture in such cases is preserved, the new provision provides 
for the issuance of an ex parte restraining order upon the 
application of the Attorney General and a statement that the 
order is needed to preserve the property while evidence support- 
ing probable cause for seizure is obtained. A party whose 
property is retrained would have a right to a post -restraint 
hearing in accordance with Rule 65(b), Fed. R. Civ. P. 

Finally, 21 U.S.C. § 888(d), which was enacted as part of 
the Anti-Drug Abuse Act of 1988, provides a mechanism whereby the 
owner of a conveyance seized for forfeiture in a drug case may 
substitute other property for the conveyance so that it is the 
substitute res, not the conveyance, that is subject to the 
forfeiture action. This allows property owners who require the 
use of their property pending resolution of a forfeiture action 
to retain use of the property while the forfeiture action 
proceeds against the substitute res . See also 21 CFR §1316.98 
(implementing § 888(d) in judicial forfeiture cases). 

Paragraph (6) of the redrafted § 981(b) generalizes this 
provision to all property seized for forfeiture under § 981, and, 
because § 981(b) is incorporated by reference into 21 U.S.C. 

27 



74 



§ 881 and 853, to all property seized in drug cases and criminal 
forfeiture cases as well. The opportunity to post a substitute 
res is not, however, available in four categories of cases: where 
the property is contraband, where it is evidence of a crime, 
where it has been specially chosen or equipped to make it 
particularly suited to committing criminal acts, or where it is 
likely to be used to commit future criminal acts if returned to 
the owner . 

The statute authorizes the government to forfeit the 
substitute res in place of the property originally seized, but it 
makes the decision to accept such substitution a matter of 
discretion for the responsible government official. This is 
needed to avoid creating the appearance that wealthy criminals 
could mock the intent of the forfeiture law by recovering their 
tainted property simply by paying a sum of money as a cost of 
doing business while continuing to enjoy the use of the seized 
property. 

A conforming amendment repeals § 888 (d) as no longer 
necessary in light of the enactment of this provision. 

Subsection (b) makes parallel changes to 21 U.S.C. § 881(b). 
Most important, the amendment repeals § 881(b) (4) which was 
construed to authorize warrantless seizures based on probable 
cause alone. See United States v. Lasanta . 978 F.2d 1300 (2d 
Cir. 1992) . The amendment makes clear that seizures must be made 
pursuant to a warrant unless an exception to the warrant 
requirement of the Fourth Amendment applies. 

Section 132 Civil Investigative Demands 

This provision passed both the Senate and the House in the 
102d Congress in slightly different form. See § 943 of S.543; 
§ 31 of H.R.26 (relating to title 18 and 21 civil forfeitures) . 
It gives the Attorney General the means, by way of a civil 
investigative demand, to acquire evidence in contemplation of a 
civil forfeiture action. Such authority is necessary because in 
the context of a civil law enforcement action there is no proce- 
dure analogous to the issuance of a grand jury subpoena that 
allows the government to gather evidence before the filing of a 
complaint . 

As Congress has recognized in several other contexts, civil 
proceedings can be an effective adjunct to law enforcement only 
if the statutory tools needed to gather evidence are enacted. 
Thus, civil investigative authority was made a part of the civil 
enforcement provisions of the Financial Institutions Reform, 
Recovery and Enforcement Act of 1989 ("FIRREA") (12 U.S.C. 
1833a), the civil provisions of RICO, 18 U.S.C. §1968,' relating 
to suits brought by the government, and the Anti-Trust Civil 



28 



75 



Process Act, 15 U.S.C. §§ 1311-1314.° The language of the pres- 
ent proposal is derived from section 951 of FIRREA. 

The proposed new section differs from earlier enactments, 
and from the version passed by both houses of Congress in the 
102d Congress, in one important respect. To address the concerns 
of Members of Congress who, in the past, have expressed opposi- 
tion to any new investigative authority that could be delegated 
to a law enforcement agency, the authority to issue a civil 
investigative demand is explicitly limited to attorneys for the 
government such as Trial Attorneys in the Department of Justice 
or Assistant U.S. Attorneys. Also, subsection (d) of the pro- 
posed statute has been revised to make clear that civil investi- 
gative demands relating to the forfeiture of a given piece of 
property may not be used once a civil complaint has been filed 
against that property, but that such demands may be issued 
regarding the forfeiture of other property not named in the 
complaint. This language ensures that investigative demands are 
not used to circumvent the discovery rules in the Federal Rules 
of Civil Procedure. 

Other new provisions include an amendment to 18 U.S.C. 
§ 1505 in subsection (c) to add a criminal penalty for obstruc- 
tion of a civil investigative demand, an amendment to the Right 
to Financial Privacy Act in subsection (d) to extend the same 
non-disclosure rules applicable to grand jury subpoenas served on 
financial institutions to civil investigative demands, and an 
amendment in subsection (e) to the Fair Credit Reporting Act to 
authorize disclosure of credit reports -ptnrsuant to civil investi- 
gative demands in the same manner as disclosure is authorized in 
response to grand jury subpoenas. 

Section 133 Access to Records in Bank Secrecy Jurisdictions 

This section deals with financial records located in foreign 
jurisdictions that may be material to a claim filed in either a 
civil or criminal forfeiture case. 

It is frequently the case that in order for the government 
to respond to a claim, it must have access to financial records 
abroad. For example, in a drug proceeds case where a claimant 
asserts that the forfeited funds were derived from a legitimate 
business abroad, the government might need access to foreign bank 
records to demonstrate in rebuttal that the funds actually came . 



^ See S. Rep. No. 91-617, 91st Cong., 1st Sess. 161 (1969). 
For a list of other statutes that authorize the gathering of 
evidence by means of an administrative subpoena, see H. Rep. No. 
94-1343, 94th Cong., 2nd Sess. 22 n.2 reprinted in 1970 U.S. CODE 
& ADMIN. NEWS 2 617. 

29 



76 



from an account controlled by international drug traffickers or 
money launderers. 

Numerous mutual legal assistance treaties (MLAT's) and other 
international agreements now in existence provide a mechanism for 
the government to obtain such records through requests made to a 
foreign government. In other cases, the government is able to 
request the records only through letters rogatory. 

This proposal deals with the situation that commonly arises 
where a foreign government declines to make the requested finan- 
cial records available because of the application of secrecy 
laws. In such cases, where the claimant is the person protected 
by the secrecy laws, he or she has it within his or her power to 
waive the protection of the foreign law to allow the records to 
be made available to the United States, or to obtain the records 
him- or herself and turn them over to the government. It would 
be unreasonable to allow a claimant to file a claim to property 
in federal court and yet hide behind foreign secrecy laws to 
prevent the United States from obtaining documents that may be 
material to the claim. Therefore, proposed subsection 986(d) 
provides that the refusal of a claimant to waive secrecy in this 
situation may result in the dismissal of the claim with prejudice 
as to the property to which the financial records pertain. 

Section 134 Access to Other Records 

This amendment allows disclosure of tax returns and return 
information to federal law enforcement-»#€-icials for use in 
investigations leading to civil forfeiture proceedings in the 
same circumstances, and pursuant to the same limitations, as 
currently apply to the use of such information in criminal 
investigations. Current law, 26 U.S.C. § 6103 (i) (4), permits the 
use of returns and return information in civil forfeiture pro- 
ceedings, but only in criminal cases does it authorize the 
disclosure of such information to law enforcement officials at 
the investigative stage. The amendment thus revises the relevant 
statute to treat civil forfeiture investigations and criminal 
investigations the same. 

Section 135 Currency Forfeitures 

This section creates a rebuttable presumption in civil 
forfeiture cases brought under the drug forfeiture statute, 21 
U.S.C. § 881, applicable to large quantities of currency. The 
presumption would apply in either of two instances: 1) where the 
currency is found in close proximity to a measurable quantity of 
a controlled substance; or 2) where there is more than $10,000 
dollars being transported in one of the places commonly used by 
drug couriers -- i.e. interstate highways, airports and off-shore 
waters -- and the person possessing the currency either disclaims 

30 



77 



ownership or gives a demonstrably false explanation for the 
source of the currency. 

Because a measurable quantity of a controlled substance must 
be involved, a positive "dog sniff" would not be sufficient to 
trigger the first presumption. Detection of a measurable 
quantity with an ion-scan machine, however, would suffice. 

The second presumption is intended to overrule recent 
decisions holding that the government failed to establish 
probable cause for forfeiture even where a large quantity of 
currency was transported in a manner inconsistent with legitimate 
possession, and the government could show, through admissible 
evidence, that the explanation given for the currency was 
patently false. See United States v. $30.060 . 39 F.3d 1039 (9th 
Cir. 1994) . 

An example of a situation where the second presumption would 
apply is United States v. $200.226.00 in United States Currency . 
1995 WL 357904 (1st Cir. Jun. 13, 1995), where government agents 
stopped a woman at an airport carrying $200,226 in cash wrapped 
in towels in her luggage, and she stated that the money 
represented a gift from her wealthy Italian boyfriend, whose 
address, telephone number and occupation were unknown to her, and 
was delivered to her in a brown paper bag by a stranger. See 

also United States v. $39,873.00 . F.3d (8th Cir. Apr. 9, 

1996) (dog sniff, packaging of currency, and proximity to drug 
paraphernalia provided sufficient probable cause for seizure of 
currency during highway stop) . — — 

The presumption is intended to place a burden on the 
claimant to produce credible evidence tending to rebut the 
inference that currency seized under the specified circumstances 
is drug money. If the claimant fails to produce such evidence, 
the inferences drawn from the circumstances will be sufficient to 
support a judgment for the government. Thus, in no case will a 
motion for judgment of acquittal be granted dismissing the 
government's complaint if the government has presented sufficient 
evidence to establish the presumption in its case in chief. 
However, the provision makes clear that notwithstanding the 
imposition of a burden of production on the claimant, the burden 
of proof remains at all times on the government . 

Title II -- CRIMINAL FORFEITURE 

Section 201 Standard of Proof for Criminal Forfeiture 

Criminal forfeiture is a part of the sentence imposed in a 

criminal case. Libretti v. United States . U.S. , 1995 WL 

648120 (Nov. 7, 1995) . Accordingly, the standard of proof for 
criminal forfeiture is the same as it is for all other aspects of 
sentencing: preponderance of the evidence. See United States v. 

31 



78 



Smith . 966 F.2d 1045, 1050-53 {6th Cir. 1992); United States v. 
Bieri . 21 F.3d 819 (8th Cir. 1994); United States v. Myers . 21 
F.3d 826 (8th Cir. 1994); United States v. Ben-Hur . 20 F.3d 313 
{7th Cir. 1994); United States v. Herrero . 893 F.2d 1512, 1541-42 
(7th Cir.), cert, denied , 110 S. Ct . 2623 (1990); United States 
V. Hernandez-Escarseqa . 886 F.2d 1560, 1576-77 (9th Cir. 1989), 
cert, denied . 110 S. Ct . 3237 (1990); United States v. Sandini . 
816 F.2d 869, 975-75 {3d Cir. 1987); but see United States v. 
Elqersma . 971 F.2d 690 (llth Cir. 1992) (applying the 
preponderance standard to the forfeiture of proceeds and reserv- 
ing judgment with respect to other property) . 

Before the Supreme Court clarified this point in Libretti , 
however, some lower courts considered the standard of proof issue 
an open question, see United States v. Saccoccia . 823 F. Supp. 
994 (D.R.I. 1993), and one appellate court held, based on 
legislative history, that the reasonable doubt standard applied 
to forfeitures in RICO cases. See United States v. Pelullo . 14 
F.3d 881 (3rd Cir. 1994). 

The amendment removes any remaining ambiguity by codifying 
the preponderance standard for all criminal forfeitures as 
Libretti requires. 

Section 202 Non-Abatement of Criminal Forfeiture When 
Defendant Dies Pending Appeal 

This amendment (which passed the Senate in 1990 as §1905 of 
§ S.1970) would overturn the questiona ble decision of the Ninth 
Circuit in United States v. Oberlin, 718 F.2d 894 (1983), which 
held that a criminal forfeiture proceeding abated upon the post- 
verdict suicide of the defendant. Compare United States v. 
Dudley . 739 F.2d 175 (4th Cir. 1984) (order of restitution does 
not abate with defendant's death) . See also United States v. 
Miscellaneous Jewelry , 667 F. Supp. 232, 245 (D. Md. 1987). The 
Solicitor General's Office in the Oberlin case, supra , and in a 
later Ninth Circuit case ( United States v. Mitchell ) , while 
deeming the issue not to warrant Supreme Court review, has 
written memoranda criticizing the court's rationale for abatement 
in the criminal forfeiture context. 

Section 203 Repatriation of Property Placed Beyond the 
Jurisdiction of the Court 

In all criminal forfeitures under RICO, the Controlled 
Substances Act, and 18 U.S.C. § 982, the sentencing court is 
authorized to order the forfeiture of "substitute assets" when 
the defendant has placed the property otherwise subject to 
forfeiture "beyond the jurisdiction of the court." Most common- 
ly, this provision is applied when a defendant has transferred 
drug proceeds or other criminally derived property to a foreign 
country. 

32 



79 



In many cases, however, the defendant has no other assets in 
the United States of a value commensurate with the forfeitable 
property overseas. In such cases, ordering the forfeiture of 
substitute assets is a hollow sanction. 

Other countries, such as the United Kingdom, address this 
problem by authorizing the court to order the defendant to 
repatriate the property that he has sent abroad. Because the 
sentencing court has in personam, jurisdiction over the defendant, 
it can use this authority to reach assets that are otherwise 
beyond the jurisdiction of the court, as long as the defendant 
retains control of the property. 

This section amends the substitute assets provisions of RICO 
and the drug forfeiture statute (which are also incorporated by 
reference into Section 982) to authorize the sentencing court to 
issue a repatriation order. That order may be issued post-trial 
as part of the criminal sentence and judgment, or pre-trial 
pursuant to the court's authority under 18 U.S.C. § 1963(d) and 
21 U.S.C. § 853(e) to restrain property, including substitute 
assets, so that they will be available for forfeiture. See 
United States v. Sellers . 848 F. Supp. 73 (E.D. La. 1994) (pre- 
trial repatriation order) . Failure to comply with such an order 
would be punishable as a contempt of court, or it could result in 
a sentencing enhancement, such as a longer prison term, under the 
U.S. Sentencing Guidelines, or both. The government has the 
authority to grant use immunity to a defendant for the act of 
repatriating property to the United States pre-trial or while an 
appeal was pending if such act would te nd L u implicate the 
defendant in a criminal act in violation of the Fifth Amendment. 
Id. (no 5th Amendment violation if government does not use 
evidence of the repatriation in its case in chief) . 

Subsection (b) directs the U.S. Sentencing Commission to 
promulgate a guideline defining the appropriate sentencing 
enhancement in these circumstances. 

Section 204 Motion and Discovery Procedures for Ancillary 
Proceedings 

This section codifies certain procedures governing the 
litigation of post-trial petitions filed by third parties in 
criminal forfeiture cases. When the ancillary hearing provisions 
were added to 18 U.S.C. § 1963 and 21 U.S.C. § 853 in 1984, 
Congress apparently assumed that the proceedings under the new 
provisions would involve simple questions of ownership that 
could, in the ordinary case, be resolved in 30 days. See 18 
U.S.C. § 1963(1) (4). Presumably for that reason, the statute 
contains no procedures governing motions practice or discovery 
such as would be available in an ordinary civil case. 



33 



80 



Experience has shown, however, that ancillary hearings can 
involve issues of enormous complexity that require years to 
resolve. See United States v. BCCI Holdings (Luxembourg) S.A. . 
833 F. Supp. 9 (D.D.C. 1993) (ancillary proceeding involving over 
100 claimants and $451 million) ; United States v. Porcelli . CR- 
85-00756 (CPS) , 1992 U.S. Dist . LEXIS 17928 (E.D.N.Y Nov. 5, 
1992) (litigation over third party claim continuing 6 years after 
RICO conviction) . In such cases, procedures akin to those 
available under the Federal Rules of Civil Procedure should be 
available to the court and the parties to aid in the efficient 
resolution of the claims. 

Because an ancillary hearing is part of a criminal case, it 
would not be appropriate to make the civil Rules applicable in 
all respects. The amendment, however, describes several funda- 
mental areas in which procedures analogous to those in the civil 
Rules may be followed. These include the filing of a motion to 
dismiss a claim, the conduct of discovery, the disposition of a 
claim on a motion for summary judgment, and the taking of an 
appeal from final disposition of a claim. Where applicable, the 
amendment follows the prevailing case law on the issue. See , 
e.g. . United States v. Lavin . 942 F.2d 177 (3rd Cir. 1991) 
(ancillary proceeding treated as civil case for purposes of 
applying Rules of Appellate Procedure) ; United States v. BCCI 
(Holdings) Luxembourg S .A. , 1993 WL 760232 (D.D.C. 1993) 
(applying court's inherent powers to permit third party to obtain 
discovery from defendant in accordance with civil rules) . The 
provision governing appeals in cases where there are multiple 
claims is derived from Fed. R. Civ. P. 54 (lT)^" 

The last provision of subsection (a) provides that a dis- 
trict court is not divested of jurisdiction over an ancillary 
proceeding even if the defendant appeals his or her conviction. 
This allows the court to proceed with the resolution of third 
party claims even as the appeal is considered by the appellate 
court. Otherwise, third parties would have to await the conclu- 
sion of the appellate process even to begin to have their claims 
heard. 

Subsection (b) , however, provides a method to allow a 
defendant, who has filed an appeal from his conviction and the 
order of forfeiture, to intervene in the ancillary proceeding for 
the limited purpose of contesting a third party petitioner's 
assertion of a legal right, title or interest in the forfeited 
property. This provision resolves a problem that could otherwise 
arise if the court were to adjudicate a petitioner's claim and 
find in favor of the petitioner while an appeal is pending, only 
to have the defendant prevail on the appeal and seek to reclaim 
the forfeited property. Under the amendment, if the defendant 
does not contest the third party's alleged interest by intei~ven- 
ing in the ancillary proceeding, he will be considered to have 
waived any claim to the property even if prevails on appeal. On 

34 



81 



the other hand, if the defendant does intervene, the court may 
determine, with finality, either that the third party does have 
an interest in the property superior to the defendant's (and the 
government's), or that the defendant has the superior interest 
which is forfeitable to the government if the conviction is 
affirmed, and which is returnable to the defendant if the convic- 
tion is reversed. 

This amendment does not alter the general rule, set forth in 
Sections 1963(1) (2) and 853 (n) (2), that a defendant has no 
standing to file a claim of his own. Nor does it alter the rule 
that the only issue involved in the ancillary hearing is the 
third party's ownership interest. All issues relating to the 
forfeitability of the property were resolved at trial; they are 
of no interest to the third party and may not be re-litigated by 
an intervening defendant. 

Subsection (c) clarifies an ambiguity in the present law. 
It is well-established that in a criminal forfeiture case, the 
court, in lieu of ordering the forfeiture of specific assets, can 
enter a personal money judgment against the defendant for an 
amount of money equal to the amount otherwise subject to 
forfeiture. United States v. Ginsburg . 773 F.2d 798, 801 (7th 
Cir. 1985) (en banc), cert, denied . 475 U.S. 1011 (1986); United 
States V. Conner . 752 F.2d 566, 576 (11th Cir.), cert, denied . 
474 U.S. 821 (1985); United States v. Solcolow . 1995 WL 113079 

(E.D. Pa. 1995), aff'd F.3d , 1996 WL 183816 (3rd Cir. 

Apr. 18, 1996). In such cases, obviously, no interests of any 
third parties' can be implicated. ThereTore; there is no need for 
any ancillary hearing. The amendment makes this clear. 

Section 205 Pre-Trial Restraint of Substitute Assets 

This amendment is necessary to resolve a split in the 
circuits regarding the proper interpretation of the pre-trial 
restraining order provisions of the criminal forfeiture statutes. 
Under 18 U.S.C. § 1963(d)(1) and 21 U.S.C. § 853(e)(1), a court 
may enter a pre-trial restraining order to preserve the avail- 
ability of forfeitable property pending trial. Until recently, 
the courts were unanimous in their view that the restraining 
order provisions applied both to property directly traceable to 
the offense and to property forfeitable as substitute assets. 
See Assets of Tom J. Billman . 915 F.2d 916 (4th Cir. 1990); 
United States v. Regan . 858 F.2d 115 (2d Cir. 1988); United 
States v. O'Brien . 836 F. Supp. 438 (S.D. Ohio 1993) ; United 
States V. Swanlc Corp. . 797 F. Supp. 497 (E.D. Va. 1992) . The 
Third, Fifth and Ninth Circuits have now held, however, that 
because Congress did not specifically reference the substitute 
assets provisions in the restraining order statutes, pre-trial 
restraint of substitute assets is not permitted. United States 
v. Flovd . 992 F.2d 498 (5th Cir. 1993); In Re Assets of Martin . 1 



35 



82 



F.3d 1351 (3rd Cir. 1993); United States v. Ripinsky . 20 F.3d 359 
{9th Cir. 1994) . 

At least one of the recent cases was based on an erroneous 
reading of the legislative history. Martin relies on a footnote 
in a 1982 Senate Report that states that the restraining order 
provision in Section 1963 would not apply to substitute assets. 
Slip op. at 17, citing S. Rep. 97-520, 97th Cong., 2d Sess. 
(1982) at 10 n.l8. The appellate court was apparently unaware 
that before the restraining order provision was finally enacted 
in 1984, the footnote in question was dropped from the Senate 
Report, thus negating any suggestion that Congress did not intend 
for the new statute to apply to substitute assets. See S. Rep. 
98-225, 98th Cong., 1st Sess. (1983) at 201-05. 

The amendment cures this problem of statutory interpretation 
by including specific cross-references to 18 U.S.C. § 1963 (m) and 
21 U.S.C. § 853 (p) at the appropriate places. 

Section 206 Defenses Applicable to Ancillary Proceedings in 
Criminal Cases 

This provision conforms the statutes governing the rights of 
third parties who assert interests in property subject to forfei- 
ture in a criminal case to the uniform innocent owner defense 
applicable to civil forfeitures. The intent is to malce it 
possible to adjudicate fully the interests of all third parties 
in property subject to criminal forfeiture so that it is no 
longer necessary to file a parallel civri- forfeiture action to 
resolve such matters. 

Most civil forfeiture statutes require a party asserting an 
interest in the property to prove that he or she was at all times 
an "innocent owner" of the property. See , e.g., 21 U.S.C. 
§881 (a) (4) (requiring proof by third party claimant that he or 
she was without knowledge of, did not consent to, and was not 
wilfully blind to the illegal acts giving rise to the forfei- 
ture) . Presently, the criminal forfeiture statutes contain 
essentially the same provision for third parties asserting an 
interest in the property acquired after the commission of the 
offense. See 21 U.S.C. §853 (n) (6) (B) ; 18 U.S.C. §1963 (1) (6) (B) 
(requiring proof by third party claimant that he was a bona fide 
purchaser for value without reason to know that the property was 
subject to forfeiture) . 

The criminal statutes, however, contain no innocent owner 
requirement for persons claiming to have bean the owners of the 
property at the time the offense giving rise to forfeiture was 
committed. This allows a claimant to recover the property even 
if he was aware of or consented to the illegal acts committed by 
the defendant. This loophole exists because under current law, a 
criminal forfeiture proceeding is limited to adjudicating the 

36 



83 



interests of the defendant; interests of third parties have to be 
litigated in parallel civil proceedings. The amendment closes 
this loophole by requiring would-be claimants to the subject 
property in a criminal forfeiture case to meet the same standards 
that they would be required to meet if the forfeiture were 
prosecuted as a civil in rem action. 

Making the civil definition of "innocent owner" applicable 
to criminal cases also resolves a conflict in the circuits 
regarding the type of legal interest that Congress intended to 
allow a third party to assert in a forfeiture proceeding under 21 
U.S.C. § 853 (n) (6) or 18 U.S.C. § 1963 (1) (6) . The issue is 
whether only persons with an ownership interest in the specific 
property subject to forfeiture -- such as a mortgage lender with 
an interest in forfeitable real property -- are covered by the 
statute, or whether the procedure is open to any person with a 
general unsecured claim against the property or estate of the 
criminal defendant. To date, four circuits have denied standing 
to general creditors while one has granted it. Compare United 
States V. BCCI Holdings (Luxembourg) S.A. , 46 F.3d 1185 (D.C. 
Cir. 1995), cert, denied, 115 S. Ct . 2613 (1995); United States 
V. Schwi,mmer . 968 F.2d 1570, 1581 (2d Cir. 1992) (general 
creditors may not file claims); United States v. Campos . 859 F.2d 
1233 (6th Cir. 1988) (same); and United States v. Lavin . 942 F.2d 
177 (3rd Cir. 1991) (tort victims may not file claims) with 
United States v. Reckmever . 836 F.2d 200 (4th Cir. 1987) (general 
creditors have a legal interest in forfeited property) . 

The ancillary hearing procedure set— forth in §§ 1963(1) and 
853 (n) was designed to ensure a speedy judicial resolution of 
specific claims to the property being forfeited, not to resolve 
the claims of general unsecured creditors and other persons with 
claims arising in contract or in tort against the criminal 
defendant. To allow every victim of a tort or breach of contract 
committed by the defendant to intervene in the criminal forfei- 
ture proceeding to attempt to assert a claim to the forfeited 
property would pervert the criminal process beyond its intended 
scope . 

By cross-referencing the uniform innocent owner statute and 
the definition of "owner" at 18 U.S.C. § 983(c) (1), the amendment 
preserves the original intent of Congress and codifies the 
leading court decisions on this issue such as United States v. 
BCCI Holdings (Luxembourg) S.A. . 833 F. Supp. 9 (D.D.C. 1993) , by 
providing that only persons with the equivalent of a secured 
interest in the specific property subject to forfeiture may 
petition for disposition of that property under §§ 1963 (1) and 
853 (n) . Victims of the crimes giving rise to the forfeiture will 
be protected by the restitution provisions of the criminal 
forfeiture statutes that permit the use of forfeited funds to 
restore property to victims. 

37 



84 



Section 207 Uniform Procedures for Criminal Forfeiture 

Section 982 does not contain its own set of definitions and 
procedures. Rather, all such matters are incorporated by refer- 
ence to the definitions and procedures set forth in 21 U.S.C. 
§ 853. This has been true since § 982 was enacted in 1986. 

The cross-reference to § 853, however, has become very 
complicated as § 982 has been amended and expanded in every 
Congress since 1986. Currently, different subsections of § 853 
are incorporated into § 982 depending upon the nature of the 
offense giving rise to the forfeiture. The differences, however, 
are not very great . With respect to forfeitures under 
§§ 982(a) (1) and (2), the only substantive differences are 1) the 
definition of "property" in § 853 (b) is incorporated for FIRREA, 
counterfeiting, explosives and other forfeitures under 
§ 982(a) (2) but not for money laundering under § 982(a) (1) ; 
2) the reverse is true for the seizure warrant authority in 
§ 853(f), which is incorporated for § 982(a)(1) forfeitures but 
not for those brought under § 982(a) (2); and 3) the provision in 
§ 853 (a) giving federal forfeiture law precedence over State law 
is omitted from § 982 entirely. More important, Congress failed 
to incorporate any procedures for forfeitures pursuant to 
§ 982(a) (3), (4) and (5), the provisions added in 1990 and 1992, 
leaving it unclear what procedures should apply in those cases. 

This convoluted cross-referencing system no longer ma)ces an^( 
sense and should be abandoned in favor of a simplified statute 
that incorporates all provisions of § ffy3~:for all § 982 forfei- 
tures. The section dealing with rebuttable presumptions in drug 
cases (subsection (d) ) is the only provision omitted because it 
has no application outside of the context of narcotics violations 
and because rebuttable presumptions applicable to § 982 offenses 
are enacted by other provisions of this Act. 

The amended version of § 982(b) (2) is drafted in such a way 
that it need not be amended again each time Congress adds a new 
forfeiture provision to subsection (a) . 

Section 208 Seizure Warrant Authority 

This amendment is intended to encourage greater use of the 
criminal forfeiture statutes. In all civil forfeiture cases 
governed by 18 U.S.C. § 981 and 21 U.S.C. § 881, the government 
may seelc the issuance of a warrant from a judge or magistrate to 
seize property subject to forfeiture. 18 U.S.C. § 981(b); 21 
U.S.C. § 881(b). Under the amendments made by this Act, property 
seized under those statutes may be forfeited either civilly or 
criminally. See 18 U.S.C. § 987. This amendment underscores 
that point by amending the criminal forfeiture statues themselves 
to provide that property may be seized for criminal forfeiture 
pursuant to § 981(b). 



38 



85 



Section 209 Forfeitable Property Transferred to Third Parties 

This section closes a possible loophole in the criminal 
forfeiture statutes that may permit third parties who acquire 
property from a defendant in a sham transaction to frustrate a 
forfeiture order by dissipating the property or converting it to 
another form. See In re Moffitt. Zwerling & Kemler, P.C. . 864 F. 
Supp. 527 (E.D. Va. 1994) (forfeitable property transferred to 
third party could not be recovered where third party dissipated 
the property) . 

18 U.S.C. § 1963(c) and 21 U.S.C. § 853(c) each provide that 
property transferred by a criminal defendant to a third party, if 
otherwise subject to forfeiture, is forfeitable from the third 
party unless such party acquired the property as a bona fide 
purchaser for value without cause to know that the property was 
forfeitable. In this way, the statute prevents criminal defen- 
dants from protecting their property from forfeiture by transfer- 
ring it to friends, relatives, heirs or associates who do not pay 
value for the property in an arms length transaction or who 
acquire it knowing that it is subject to forfeiture. Mof f it , 
supra . As Moffitt explained, however, the current statute 
contains no provision to address a situation that can arise 
should a third party conceal or dissipate the forfeitable 
property. In such situations, the criminal forfeiture statute 
"is a weak tool for divesting third parties of property received 
from criminal defendants." Id. The court explicitly called on 
Congress to "remedy" this situation. Id. 

Under the amendment, a third party who is not a bona fide 
purchaser of the forfeitable property, would become personally 
; liable for an amount equal to the value of property in the event 
1 the property cannot be turned over to the government due to the 
! third party's act or omission. For example, if the defendant 
i' gave his forfeitable property to his defense attorney who then 
dissipated the property instead of turning it over to the 
government, the defense attorney would be personally liable for 
the amount of the dissipated property. 

Section 210 Right of Third Parties to Contest Forfeiture of 
Substitute Assets 

Current law is unclear with respect to when the government's 
interest in substitute assets vests. See United States v. 
Rjpinsky . No. CR 93-409(A) WJR (CD. Cal . Mar. 24, 19&5) . Some 
have argued that because the relation-back provisions of 
§§ 853(c) and 1963(c) do not expressly apply to substitute 
assets, the government's interest in substitute assets does not 
vest until the jury returns a special verdict of forfeiture or 
the court enters a preliminary order of forfeiture. Others have 
argued that because the substitute asset is forfeited in place of 
property in which the government's interest vested at the time of 

39 



86 



the act giving rise to forfeiture, the government's interest in 
the substitute asset vests on the date on which the crimes were 
committed. Still another interpretation is that the government's 
interest in substitute assets vests at the time the grand jury 
returns an indictment including a substitute assets provision, 
because at that time the defendant and any potential claimants 
(including potential bona fide purchasers) are placed on notice 
that the defendant's estate is subject to forfeiture up to the 
amount of the proceeds of his criminal activity. 

The amendment ends this uncertainty by adopting the third 
interpretation as a reasonable compromise between the other two 
more extreme positions. Under this provision, a defendant would 
be free to transfer his untainted property to a third person at 
any time prior the filing of an indictment, information or bill 
of particulars identifying the property as subject to forfeiture 
(unless, of course, the property was subject to a pre- indictment 
restraining order) . After that time, however, the defendant and 
potential transferees would be on notice that the government was 
seeking to forfeit the property as substitute assets in a crimi- 
nal case, and that the property would belong to the government 
upon the conviction of the defendant and the entry of an order of 
forfeiture. Accordingly, any transfer by the defendant to a 
third party after the property was identified in an indictment, 
information or bill of particulars would be void, unless the 
transferee establishes, pursuant to the provisions of the Uniform 
Innocent Owner Defense applicable to after-the-fact transferees, 
18 U.S.C. § 983(b) (2), that he or she was a bona fide purchaser 
for value of the property who was reasonably without cause to 
believe that the property was subject to forfeiture. 

Section 211 Hearings on Pre-trial Restraining Orders; Assets 
Needed to Pay Attorneys Fees 

The criminal forfeiture statutes provide that in order to 
preserve assets for forfeiture at trial, the government may seek, 
and the court may issue, an ex parte pre-trial restraining order. 
See 18 U.S.C. § 1963(d); 21 U.S.C. § 853(e). This procedure 
supplements, and does not preclude, seizure of the property 
pursuant to a seizure warrant . 

If a restraining order is to be issued before any indictment 
is returned, "persons appearing to have an interest in the 
property" are entitled to an immediate hearing."^ 18 U.S.C. 
§ 1963 (d) (1) (B) & (2); 21 U.S.C. § 853 (e) (1) (B) & (2). The 



Restraining orders apply to both the criminal defendant 
and to any third party who might otherwise have access to the 
subject property. United States v. Jenkins . 974 F.2d 32 (5th 
Cir. 1992); In re Assets of Tom J. Billman , 915 F.2d 916 (4th 
Cir. 1990); United States v. Reoan . 858 F.2d 115 (2d Cir. 1988) 

40 



87 



statute, however, makes no provision for any hearing -- either 
pre- or post-restraint -- where the property is not restrained 
until after an indictment is filed. 

The legislative history of these provisions makes clear that 
Congress considered a hearing unnecessary in the post -indictment 
context because the grand jury's finding of probable cause to 
believe that the restrained property was subject to forfeiture 
was sufficient to satisfy the due process rights guaranteed by 
the Fifth Amendment. 

[T] he probable cause established in the indictment or 
information is, in itself, to be a sufficient basis for 
issuance of a restraining order. While the court may 
consider factors bearing on the reasonableness of the 
order sought, it is not to "look behind" the indictment 
or require the government to produce additional evi- 
dence regarding the merits of the case as a prerequi- 
site to issuing a post -indictment restraining order. 

S. Rep. 255, 98th Cong., 1st Sess. (1983) at 202-03. 

The Senate Report went on to explain that the statute was 
not intended to preclude the court from holding a post-restraint 
hearing in appropriate circumstances to determine if a restrain- 
ing order should be continued, but it stressed that in that 
context as well, the court was not to reexamine the validity of 
the indictment or the grand jury's finding of probable cause for 
the forfeiture. ^- 

This provision does not exclude, however, the authority 
to hold a hearing subsequent to the initial entry of 
the order and the court may at that time modify the 
order or vacate an order that was clearly improper 
( e.g. . where information presented at the hearing shows 
that the property restrained was not among the property 
named in the indictment. However, it is stressed that 
at such a hearing the court is not to entertain chal- 
lenges to the validity of the indictment . For the 
purposes of issuing a restraining order, the probable 
cause established in the indictment or information is 
to be determinative of any issue regarding the merits 
of the government's case on which the forfeiture is to 
be based. 

Id. at 203 (emphasis supplied) . 

Congress' principal concern in precluding any re-examination 
by the court of the validity of the indictment was that such an 
examination might force the government to make a "damaging prema- 
ture disclosure of the government's case and trial strategy." 
Id. at 196. 

41 



88 



Since the restraining order provisions were enacted in 1984, 
several appellate courts have had occasion to determine whether 
the statutory structure comports with due process under the 5th 
Amendment The courts unanimously hold that due process does not 
require an pr-P-restraint adversary hearing where the restraining 
order is not issued until after the return of an indictment. See 
e a TTni-^ ^ c^^^^c y. Monsanto . 924 F.2d 1186, 1192 (2d Cir. 
T^^~ 7^;:rt-^rf .grates V. Bissell . 866 F.2d 1343, 1352 (11th Cir. 
1989)' In such circumstances, the property owner's right to a 
hearing is outweighed by the government's need for "some means of 
promptly heading off any attempted disposal of assets that might 
be made in anticipation of a criminal forfeiture." Monsantp , 924 
F.2d at 1192. 

The courts differ, however, as to whether a post -indictment 
restraining order may be continued up to and through trial with- 
out granting the defendant an opportunity for a ^ost- restraint 
hearing Those courts that would require such a hearing also 
differ among themselves as to whether the scope the hearing 
should include a re -examination by the court of the validity of 
the indictment and the grand jury's finding of probable cause for 
forfeiture. 

On the one extreme, the Eleventh Circuit has held that there 
is no constitutional right to a post-restraint hearing on the 
validity of a restraining order because the Speedy Trial Act 
ensures that a defendant will have a prompt opportunity to chal- 
lenge the validity of the order at trial. Bissell , 866 F-2d at 
1354. See Tn Re Protective Order , 790TT-^upp. 1140 (S.D. Fla. 
1992) The Eleventh Circuit holds this view even where the 
defendant alleges that the restraining order infringes upon his 
Sixth Amendment right to hire counsel of his choice. Bissell , 
supra The Tenth Circuit is in accord, at least where the right- 
t^^^^unsel issue is not implicated. See United States v. Musson , 
802 F 2d 384, 387 (10th Cir. 1986) (no hearing required); but see 
United St;^t-ps v. Nichols , 841 F.2d 1485, 1491 n.4 (lOth Cir. 
1988) (leaving open question whether hearing is required if Sixth 
Amendment issue is raised) . 

On the other extreme, the Second Circuit, in a 7-6 en banc 
opinion, has held not only that a post-restraint, pre-trial 
hearing is required whenever Sixth Amendment right to counsel 
issues are raised, but that at such hearing the court is required 
"to reexamine the probable cause determinations" embodied in tne 
grand jury indictment. Monsanto , 924 F.2d at 1195-97. In so 
holding, the Second Circuit expressly declined to follow 
Congress' admonition that the courts should not "entertain chal- 
lenges to the validity of the indictment." 924 F.2d at 1197, 
quoting S. Rep. 225, supra , at 196. See also United States v. 
Crozier , 777 F.2d 1376, 1383-84 (9th Cir. 1985). 



42 



89 



In between these two extremes, several courts have held that 
a defendant's Sixth Amendment right to counsel is an interest of 
such importance that due process requires that the defendant be 
granted a hearing pre-trial to determine the validity of an order 
that restrains the assets the defendant would use to retain 
counsel of his choice. See e.g. United States v. Mova-Gomez . 860 
F.2d 706, 729 (7th Cir. 1988); United States v. Thier . 801 F.2d 
1463, 1469 (5th Cir. 1986) . As the Seventh Circuit noted in 
Moya- Gomez , cases implicating the Sixth Amendment are unique 
because a "defendant needs the attorney [pre-trial] if the attor- 
ney is to do him any good." 860 F.2d at 726. Thus, where the 
defendant asserts that the assets he would use to hire counsel 
have been improperly restrained, forcing the defendant to wait 
until the time of trial to contest the restraining order would 
constitute an unconstitutional "permanent deprivation" of proper- 
ty without a hearing. Id. 

These courts, however, have declined to go as far as the 
Second Circuit in Monsanto in sanctioning a full-blown reexamina- 
tion of the validity of the indictment. For example, in Thier . 
the Fifth Circuit noted Congress' "clear intent to specifically 
forbid a court to 'entertain challenges to the validity of the 
indictment' at a hearing on a motion to modify or vacate a re- 
straining order," 801 F.2d at 1469-70, and held that the grand 
jury's finding of probable cause that the defendant's property 
was subject to forfeiture should be regarded as a strong, though 
not irrebuttable, showing in support of the restraining order. 
801 F.2d at 14 70. The court continued: 

The court is not free to question whether the grand 
jury should have acted as it did, but it is free, and 
indeed required, to exercise its discretion as to 
whether and to what extent to enjoin based on all 
matters developed at the hearing. 

Id. 

Similarly, the Seventh Circuit in Mova-Gomez held that where 
Sixth Amendment issues are implicated, the defendant is entitled 
to a hearing at which the government is "required to prove the 
likelihood that the restrained assets are subject to forfeiture." 
860 F.2d at 731. But at the same time the court held that the 
"careful and deliberate judgment of Congress" was entitled to 
"respect," 860 F.2d at 729, and that therefore " [w] hatever may be 
the precise limits on the authority of the district judge at a 
[post-restraint] hearing . . . , it is clear that the court may 
not inquire as to the validity of the indictment and must accept 
that 'the probable cause established in the indictment or infor- 
mation is . ■ ■ determinative of any issue regarding the merits 
of the government's case on which the forfeiture is to be 
based. ' " 860 F.2d at 728 (emphasis supplied), quoting S. Rep. 
225, supra . 

43 



90 



The Seventh Circuit continued as follows: 

It is therefore not open to the defendant to attempt to 
persuade the court that the government's claim to the 
property is any less strong than suggested by the 
government in the indictment .... 

Id. See Monsanto {Cardamone, J. dissenting), 924 F.2d at 1206 
("The prosecution's ability to prepare its case without being 
forced to 'tip its hand' prematurely was of paramount importance 
to the drafters and provides a persuasive reason for delaying a 
full adversarial hearing on the merits of the government's case 
during the post-restraint, pre-trial period."); United States v. 
O'Brien . 836 F. Supp. 438 (S.D. Ohio 1993) (following Mova- Go- 
mez ) . 

The proposed legislation attempts to end the uncertainty and 
ambiguity in the law by codifying the majority view, consistent 
with the original intent of Congress, on the issues raised. 
Proposed paragraph (4) codifies the rule that permits the 
district court, in its discretion, to grant a request for a 
hearing for modification of the restraining order. 

Paragraph (4) also sets forth two grounds, other than the 
Sixth Amendment grounds, upon which a court may be aslced to 
modify a restraining order. As the Second Circuit held in Mon- 
santo , an order may be modified upon a showing that even if all 
of the facts set forth in the indictment are established at 
trial, the restrained property would not "be subject to forfei- 
ture. 924 F.2d at 1199, quoting S. Rep. 225 at 203. The court 
would also have the discretion to revise an order, in light of 
evidence produced at a hearing, to employ less restrictive means 
of restraint if such means are available to protect the 
government's interests without infringing on the defendant's 
property rights unnecessarily. Id. at 1207 (Cardamone, J. dis- i 
senting) . Under the statute, the court would have the discretion 
to grant a hearing for such purposes at any time before trial. 

With respect to the use of restrained property to retain 
criminal defense counsel, the restraining order would be modified 
if the defendant establishes that he or she has no other assets 
available with which to retain counsel, demonstrates that there 
is no probable cause to believe that the restrained property is 
likely to be forfeited if the defendant is convicted. The issue 
before the court, however, would be solely the likelihood of 
forfeiture assuming a conviction. As Congress stated in the 1984 
legislative history, and as the majority of courts have held 
since that time, the indictment itself conclusively establishes 
probable cause regarding the criminal offense upon which the 
forfeiture would be based. Thus, in a money laundering case, for 
example, the court would require the government to establish 
probable cause to believe that the restrained assets were 

44 



91 



\ 



"involved in" the money laundering offense (s) set forth in the 
indictment, see 18 U.S.C. § 982(a)(1), but it would not look 
behind the indictment to determine independently whether there 
was probable cause to believe that the money laundering offense 
itself had been committed. 

This provision explicitly codifies the 1984 legislative 
history and recent case law regarding challenges to the suffi- 
ciency of the indictment. It would prohibit the defendant from 
challenging the validity of the indictment itself, and would bar 
the court from reexamining the factual basis for the grand jury's 
finding of probable cause. In this way, the statute would pro- 
tect the defendant from the unlawful restraint of his property 
when there is no legal basis for the restraint, but it would 
preclude the use of the pretrial hearing as pretext for forcing 
the government to 'tip its hand' prematurely as to its evidence 
and trial strategy. 

New paragraph (4) also contains a provision permitting, for 
the first time, third parties to contest pre-trial restraining 
orders in certain circumstances. Generally, third parties may 
not intervene in a criminal case until after the preliminary 
order of forfeiture is entered post-verdict. See 18 U.S.C. 
§ 1963 (i); 21 U.S.C. § 853 (k) . The amendment does not alter that 
general rule. However, if the restraining order causes a serious 
hardship to a third party, the court could modify the restraining 
order to impose a less-burdensome, but equally effective, 
alternative means of preserving the property for forfeiture. 

The third party, however, could not assert his "innocent 
lov'jner" defense in such a pre-trial hearing as a reason for 
modifying the restraining order. Such defenses are clearly 
limited by §§ 1963 (i) and 853 (k) to the ancillary hearing. 

Subparagraph (E) of new paragraph (4) provides that when the 
pre-trial restraining order pertains to "substitute assets," the 
order shall exempt money needed to pay attorneys fees, cost of 
living expenses, and other costs without the necessity of any 
showing by the defendant other than a showing that the property 
is in fact needed for the designated purposes. The reason the 
restraint of substitute assets is treated differently from the 
restraint of property directly subject to forfeiture is that 
property in the latter category is "tainted" property that, under 
the relation back doctrine, belongs to the United States. A 
criminal defendant has no right to use such property for any 
purpose as long as there is a prima facie showing that the 
property is subject to forfeiture. In contrast, substitute 
assets are, by definition, untainted assets which may be exempted 
from forfeiture for certain limited purposes. 

The amendment to paragraph (3) is intended to make clear 
that the court should take whatever steps are necessary to avoid 

45 



92 



use to of a restraining order hearing to expose on-going law 
enforcement operations, to examine law enforcement agents 
concerning the subject matter of their testimony at an upcoming 
criminal trial, or to learn the names and addresses of witnesses 
who might be susceptible to intimidation. 

Finally, the amendment also revises paragraph (3) to remove 
an ambiguity in the law, reflected in cases in the Fifth Circuit, 
regarding the applicability of Rule 65 of the Federal Rules of 
Civil Procedure to restraining orders under 21 U.S.C. § 853(e) 
and 18 U.S.C. § 1963 (d) . See United States v. Thier . supra , 
applying the standards of temporary restraining orders under Rule 
65 to § 853(e)(1) restraints. The amendment ma)ces clear that 
Rule 65 does not apply to restraints imposed under any of the 
provisions of § 853(e) and § 1963(d) because, in light of the 
amendments made by this section, those provisions will contain 
their own procedural requirements. 

Section 212 Availability of Criminal Forfeiture 

Under current law, 28 U.S.C. § 2461(a), a statute that 
provides for forfeiture without prescribing whether the 
forfeiture is civil or criminal is assumed to authorize only 
civil forfeiture. Thus, in such cases the government is required 
to file parallel civil and criminal cases in order to prosecute 
an individual and forfeit the proceeds of the offense. See e.g. 
18 U.S.C. § 1955 (gambling). 

The amendment resolves this probleUPBy" authorizing criminal 
forfeiture whenever any form of forfeiture is otherwise 
authorized by statute. 

Section 213 Appeals in Criminal Forfeiture Cases 

The amendments in this section clarify the government's 
authority to appeal an adverse pre-trial or post-trial decision 
in a criminal forfeiture case. 

In United States v. Horak . 833 F.2d 1235, 1244 (7th Cir. 
1987) , the Court of Appeals for the Seventh Circuit held that it 
did not have jurisdiction under 18 U.S.C. § 3731 to hear an 
appeal by the government from a district court ' s denial of 
forfeiture pursuant to 18 U.S.C. § 1963(a). As noted by the 
Court of Appeals, absent express Congressional authorization, the 
government has no authority to appeal in a criminal case. Id. at 
1244 . The Court concluded that there is no statutory basis for 
government appeal under § 3731 when a district court refuses to 
enter an order of forfeiture because that statute provides only 
that the government can appeal upon the dismissal of an indict- 
ment or information or a count thereof, or upon the granting of 
new trial as to one or more counts after verdict or judgment. 



46 



93 



The Court reasoned that the denial of a forfeiture is not 
analogous to the dismissal of an indictment and held that section 
3731 did not authorize a government appeal from the district 
court's decision denying the forfeiture. Id. at 1248. The Court 
held that the forfeiture order was part of Horak's sentence and 
that section 3731 does not provide a basis for a government 
appeal from a sentence. Id. at 1246-48. 

The government has been allowed to appeal forfeiture deci- 
sions in other cases. In United States v. Investment Enterpris- 
es. Inc. . 10 F.3d 263, 264 (5th Cir. 1993), the Court of Appeals 
for the Fifth Circuit held that the denial of a motion for order 
of forfeiture was appealable by the government under 18 U.S.C. 
§ 3742(b) which permits the government to appeal a sentence. But 
that statute does not presently make clear whether the government 
may appeal when the district court orders the forfeiture of some 
but not all of the subject property, or when the district court 
mitigates a forfeiture in order to address a perceived violation 
of the Excessive Fines Clause. (Avoidance of a constitutional 
violation is the only basis on which a court may mitigate a 
forfeiture in a criminal case.) 

Accordingly, § 3731 is amended to permit the government to 
appeal from orders dismissing a forfeiture count in an indictment 
or dismissing individual assets named in a forfeiture count. In 
addition, § 3742 is amended to make explicit the statutory basis 
for a government appeal from a denial or mitigation of forfei- 
ture, in whole or in part. 

Section 214 Discovery Procedure For Locating Forfeited Assets 

This section amends 18 U.S.C. § 1963 (k) and 21 U.S.C. 
§ 853 (m) to give the court the discretion to exclude a convicted 
defendant from a post-trial deposition conducted for the purpose 
of locating the defendant's forfeited assets if the defendant's 
presence could frustrate the purpose of the inquiry. The 
provision is necessary because otherwise, under Rule 15 of the 
Federal Rules of Criminal Procedure, the defendant would have the 
right to be present at a deposition conducted for the purpose of 
locating assets that have been declared forfeited. United States 

v. Saccoccia . F. Supp. , 1996 WL 28968 (D.R.I. Jan. 19, 

1996) . If, for example, the assets include funds in bank 
accounts that the defendant had hoped to conceal from the 
government and the court, the defendant's presence at the 
deposition could frustrate its purpose because upon learning that 
the government had discovered the location of his secret 
accounts, the defendant could quickly take steps to remove the 
assets before government agents could recover them. 

Section 215 Scope of Criminal Forfeiture 



47 



35-668 96-4 



94 



This section makes a significant change in the scope of 
criminal forfeiture. Under current law, only the property of the 
defendant is forfeitable in a criminal case. That is, if a court 
or a jury pursuant to Rule 31(e) of the Federal Rules of Criminal 
Procedure, finds that property is subject to forfeiture and that 
the defendant has an interest in the property, the property is 
forfeited to the extent of the defendant's interest. But 
property in which the defendant has no interest is not 
forfeitable in a criminal case. See United States v. Ham . 58 
F.3d 78 (4th Cir. 1995) (district court cannot enter order of 
forfeiture unless jury has entered a special verdict regarding 
the extent of the defendant's interest in the property). 

Thus, in a drug case, the defendant's interest in real 
property used to facilitate the drug violation is subject to 
forfeiture, but the interest of his spouse is not, even if the 
spouse was complicit in the crime. To forfeit the spouse's 
interest, the government has to file a parallel civil forfeiture 
action. See United States v. Jimerson . 5 F.3d 1453 (11th Cir. 
1993) . 

The ancillary proceeding provisions in 21 U.S.C. § 853 (n) 
and 18 U.S.C. § 1963(1) exist to give third parties the 
opportunity to dispute the court or jury's finding that the 
defendant was the owner of the property. They do not, however, 
currently provide a vehicle to allow the government to forfeit a 
third party's interest in the criminal case where there has been 
no finding that the property belonged exclusively to the 
defendant. In other words, unlike a ci'vii--in_rem provision, the 
ancillary hearing provision does not allow the government to 
forfeit the interest of a spouse, lienholder or other co-owner of 
property who knowingly allowed the defendant to use the property 
for an illegal purpose; if a third party establishes superior 
ownership, he or she will prevail in the ancillary proceeding 
even if he or she is not an "innocent owner." 

This situation leads to wasteful and duplicative litigation 
as the government must file parallel civil proceedings every time 
it seeks to divest a non- innocent third party of his or her 
interest in property. The amendment resolves this problem by 
explicitly authorizing the government to forfeit in a criminal 
case any property in which the defendant has an interest, 
notwithstanding the interest of a spouse, lienholder or other 
third party. It also allows the ancillary proceeding to be used 
as an in rem proceeding to forfeit the third party interests so 
that it is no longer necessary to file a parallel civil 
proceeding. 

In a case where the government invokes this provision to 
forfeit a third party's interest in the criminal case,- the third 
party would, of course, have the right to challenge the finding, 
by the court or jury, that the property was subject to 

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forfeiture. This does not alter the general rule that where only 
the defendant's property is being forfeited, a third party may 
attempt to show a superior interest in the property, but may not 
contest the finding that a crime occurred and that the property 
involved in or derived from that criminal offense. 

TITLE III -- PROPERTY SUBJECT TO FORFEITURE 

Section 301 Forfeiture of Proceeds of Federal Crimes 

This amendment makes the proceeds of any crime in title 18, 
United States Code, subject to civil and criminal forfeiture. It 
does not override more specific provisions authorizing forfeiture 
of facilitating property and instrumentalities of crime under 
existing forfeiture statutes. See e.g. 18 U.S.C. § 1955(d) 
(relating to gambling); § 981(a)(1)(A) and § 982(a)(1) (relating 
to money laundering) . 

By providing for forfeiture of the proceeds of all federal 
title 18 offenses, the amendment ensures that the government will 
have a means of depriving criminals of the fruits of their crim- 
inal acts without having to resort to the RICO and money launder- 
ing statutes -- provisions which currently permit forfeiture of 
criminal proceeds but which also carry higher penalties -- in 
cases where it is unnecessary to do so or where the defendant is 
willing to enter a guilty plea to the offense that generated the 
forfeitable proceeds but not to the RICO or money laundering 
offense . 

The section includes a set of congressional findings 
intended to make it clear that Congress regards the forfeiture of 
criminal proceeds to be remedial, not punitive, in nature. This 
conforms with the majority of cases to address this issue in the 
context of the 8th Amendment's Excessive Fines Clause and the 5th 
Amendment's Double Jeopardy Clause. See United States v. Tillev . 
18 F.3d 295 (5th Cir. 1994) (forfeiture of proceeds does not 
implicate double jeopardy because it is not punitive) ; United 
States v. Alexander . 32 F.3d 1231 (8th Cir. 1994) (forfeiture of 
proceeds cannot constitute an excessive fine because it is not 
punitive) . 

Section 302 Uniform Definition of Proceeds 

Sections 981 and 982 were amended and expanded in 1988, 
1989, 1990 and 1992 to add new offenses to the list of crimes for 
which forfeiture is authorized. In each instance, Congress chose 
a different term to describe the property that could be forfeit- 
ed, leading to great confusion as to the difference, if any, 
between "proceeds" and "gross proceeds" and between "gross pro- 
ceeds" and "gross receipts." The amendment eliminates this 
problem by using the term "proceeds" throughout the statutes and 
by defining that term to mean all of the property derived, di- 

49 



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rectly or indirectly, from an offense or scheme, not just the net 



profit . 



A recent example of the confusion inherent in current law 
is the decision in United States v. 122.942 Shares of Common 
Stock , 847 F. Supp. 105 (N.D. 111. 1994). In that case, a court 
found that stock in a financial institution had been obtained 
through fraud and that the stock was forfeitable under 
§ 981(a) (1) (C) . The court held, however, that in the absence of 
a definition of "proceeds, " it had to interpret "proceeds" to 
mean only net profits. Therefore, the court ordered the 
government to return to the wrongdoer the money he had fraud- 
ulently invested to obtain the stock. 

This makes no sense. A person committing a fraud on a 
financial institution has no greater right to recover the money 
he invested in the fraud scheme than a drug dealer has to recover 
his overhead expenses when ordered to forfeit the proceeds of 
drug trafficking. 

The definition of "proceeds" is intended to be interpreted 
broadly. It applies to any kind of property, real or personal, 
obtained at any time as a result of the commission of a criminal 
offense, and any property traceable to it. Thus, for example, 
the money received as a result of a false loan application would 
be the proceeds of the bank fraud offense. If the loan proceeds 
were used to buy a car, the car would be considered traceable to 
the proceeds of the bank fraud offense and would be forfeitable 
even if the loan were subsequently repaid Because the offender 
would have had the use of the fraudulently obtained loan to 
purchase the property, and the statute makes all property ob- 
tained as a result of the offense forfeitable, not just the net 
profit. 

The last two sections of the amendment extend the same 
uniform definition of proceeds to the drug forfeiture statutes 
and RICO. 

Section 303 Forfeiture of Firearms Used in Federal Crimes 

The amendment adds the authority to forfeit firearms used to 
commit crimes of violence and all felonies to 18 U.S.C. §§ 981 



® The amendments to the criminal forfeiture statutes refer 
to the proceeds of the entire scheme or course of conduct because 
otherwise the forfeiture might be construed as limited to the 
property derived directly from the offense of conviction. There 
is no need for a similar provision in the civil forfeiture 
statutes, because property is subject to forfeiture in rem if it 
was derived from criminal activity generally. See United States 
V. Parcels of Land . 903 F.2d 36, 42 (1st Cir. 1990). 

50 



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and 982. This authority would be in addition to the authority 
already available to Treasury agencies under 18 U.S. C. § 924(d). 

The purpose of the amendment is 1) to provide for criminal 
as well as civil forfeiture of firearms; and 2) to permit 
forfeiture actions to be undertaken by Department of Justice law 
enforcement agencies who have authority to enforce the statutes 
governing crimes of violence but who do not have authority to 
pursue forfeitures of firearms under the existing statutes. 

Section 924 (d) of title 18 already provides for the civil 
forfeiture of any firearm used or involved in the commission of 
any "criminal law of the United States." The statute, however, 
is enforced only by the Treasury Department and its agencies; it 
provides no authority for the FBI, for example, to forfeit a gun 
used in the commission of an offense over which it has sole 
jurisdiction. Moveover, § 924(d) provides for civil forfeiture 
only. 

Subsection (d) adds a provision to 18 U.S.C. § 924(d) in- 
tended to permit the Bureau of Alcohol, Tobacco and Firearms to 
forfeit property that otherwise would have to be forfeited by 
another agency. Under § 924 (d) , ATF is presently authorized to 
forfeit a firearm used or carried in a drug trafficking crime. 
Property involved in the drug offense itself, such as drug pro- 
ceeds, may also be forfeitable under the Controlled Substances 
Act, 21 U.S.C. § 881, but ATF does not presently have authority 
to forfeit property under that statute and has to turn the for- 
feitable property over to another agency. The amendment does not 
expand the scope of what is forfeitable in any way, but does 
allow the forfeiture to be pursued by ATF when the agency is 
already involved in the forfeiture of a firearm in the same case. 

Section 3 04 Forfeiture of Proceeds Traceable to Facilitating 
Property in Drug Cases 

Currently 21 U.S.C. § 881(a)(4) permits the forfeiture of 
conveyances used to facilitate a controlled substance violation. 
Similarly, § 881(a) (7) permits the forfeiture of real property 
used to facilitate such a violation. Neither statute, however, 
explicitly extends to the forfeiture to the proceeds traceable to 
the sale of such conveyances or real property. Not infrequently, 
for investigative reasons, facilitating property is not immedi- 
ately seized. Thus, the owners are able to sell the property and 
the proceeds of that sale are outside the purview of the statute. 
Similarly, if property is destroyed before it is seized, the 
government is unable to forfeit the insurance proceeds. 

The amendment revises §§ 881(a) (4) and (7) to permit forfei- 
ture of proceeds traceable to forfeitable property, including 
proceeds of a sale or exchange as well as insurance proceeds in 
the event the property is destroyed. The amendment also insures 

51 



98 



that the "innocent owner" exceptions apply to the forfeiture of 
traceable property in all cases where the facilitating property 
itself would not be forfeitable. (This latter provision is 
necessary, of course, only if the uniform innocent owner provi- 
sions of 18 U.S.C. § 983 are not enacted. If § 983 is enacted, 
these innocent owner provisions will be stricken by conforming 
amendments . ) 

The portion of this amendment relating to § 881(a) (4) passed 
the Senate in 1990 as § 1907 of S. 1970. 

Section 305 Forfeiture for Alien Smuggling 

These amendments to the Immigration and Nationality Act (the 
INA) would enhance the ability of the Immigration and Naturaliza- 
tion Service (the Service) to address the problem of alien smug- 
gling by broadening the authority to obtain forfeiture of proper- 
ty used in or derived from smuggling operations. 

Under current law, the Service may obtain forfeiture of 
conveyances (vehicles, boats, aircraft) used to smuggle, trans- 
port, or harbor aliens. This section would amend section 274(b) 
of the INA, 8 U.S.C. 1324(b), to broaden this forfeiture authori- 
ty. The amendment maizes subject to civil and criminal forfeiture 
all property, both real and personal, used or intended to be used 
to smuggle aliens. Also subject to forfeiture would be any 
property, real or personal, which constitutes, is derived from, 
or is traceable directly or indirectly to the proceeds of the 
smuggling, transportation, or harboring oT aliens. 

Innocent owners of property are protected by the proposed 
uniform innocent owner statute, to be codified at 18 U.S.C. 
§ 983. 

Section 306 Forfeiture of Proceeds of Certain Foreign Crimes 

Inspired by the government ' s experience in the BCCI case and 
certain terrorism cases, this provision expands the scope of the 
forfeiture statutes to permit forfeiture of the proceeds of 
certain foreign crimes, including bank fraud, murder, robbery, 
kidnapping and extortion, if found in the United States. 

In 1992, the same foreign crimes were added to the defini- 
tion of "specified unlawful activity" in the money laundering 
statute, 18 U.S.C. § 1956(c)(7)(B). Thus, it is presently a 
crime to launder the proceeds of some of these offenses in the 
United States, and such proceeds are forfeitable if they are 
laundered under § 981(a) (1) (A) . The amendment, which passed the 
Senate in another form as § 955 of S.543 in 1991, would amend 
§ 981(a) (1) (B) so that the same proceeds and the proceeds of 
additional offenses are forfeitable directly without the 
government's having the additional and unnecessary burden of 

52 



99 



showing that a money laundering violation took place. This would 
be consistent with the treatment of foreign drug proceeds which 
are forfeitable if found in the United States whether they are 
laundered here or not . 

The purpose of the amendment is two- fold: to make it more 
difficult for terrorists and perpetrators of international bank 
fraud schemes to use the United States as a haven for the profits 
from their crimes, and to permit the United States to assist 
foreign governments in recovering the proceeds of crimes commit- 
ted abroad. Foreign organized crime groups frequently invest the 
proceeds of the illegal activities in real property. For exam- 
ple, this is a particularly serious problem in Hawaii where real 
property has been purchased by the Japanese Yakuza. Under cur- 
rent law, those properties may be forfeited only if and when they 
are involved in a future money laundering offense. Under the 
amendment, they would become forfeitable immediately, and any 
foreign government that assisted the United States in the forfei- 
ture action would be eligible to receive a portion of the for- 
feited property under § 981 (i). Because the federal courts are 
not currently authorized to enforce foreign forfeiture orders, 
the property cannot be returned to the foreign government if it 
is not forfeitable under our law. 

As is the case for the existing provision relating to for- 
eign drug crimes, the forfeiture provision in § 981 would only 
apply where the foreign offense was punishable by at least one 
year in prison in the foreign country, and would be recognized as 
a felony under federal law if committed— wi^;hin the jurisdiction 
of the United States. 

Section 307 Forfeiture of Property Used to Facilitate Foreign 
Drug Crimes 

In accordance with the United Nations Convention Against the 
Illicit Traffic in Narcotic Drugs and Psychotropic Substances 
(the "Vienna Convention"), which the United States ratified on 
November 11, 1990, the United States is obligated to enact pro- 
cedures for the forfeiture of both the proceeds and the in- 
strumentalities of foreign crimes involving drug trafficking. 18 
U.S.C. § 981(a)(1)(B) already provides for the forfeiture of 
foreign drug proceeds, but it does not provide for the forfeiture 
of facilitating property. The amendment rectifies this omission. 

Section 308 Forfeiture for Violations of Section 60501 

Sections 981 and 982 are the civil and criminal forfeiture 
statutes pertaining to money laundering. Presently, they provide 
for forfeiture for money laundering violations under the Bank 
Secrecy Act (31 U.S.C. § 5311 et seq. ) and the Money Laundering 
Control Act (18 U.S.C. §§ 1956-57). The amendment would add 



53 



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Section 60501 of the Internal Revenue Code to this list in both 
statutes. 

Section 60501 is the statute that requires any trade or 
business receiving more than $10,000 in cash to report the trans- 
action to the IRS on Form 8300. Subsection (f) makes it an 
offense to structure a transaction with the intent to avoid the 
filing of such form. Thus, Section 60501 is the counterpart to 
31 U.S.C. §§ 5313 and 5324 which require the filing of CTR and 
CMIR forms by financial institutions whenever a $10,000 cash 
transaction takes place, and by other persons whenever they send 
more than $10,000 in currency into or out of the United States. 
Including a reference to Section 60501 in Sections 981 and 982 
thus means that violations of the Form 8300 requirement will be 
treated the same as CTR and CMIR violations for forfeiture pur- 
poses . 

Section 309 Criminal Forfeiture for Money Laundering 
Conspiracies 

Current law provides for the forfeiture of property involved 
in the substantive money laundering offenses set forth in titles 
18 and 31. It also provides for the forfeiture of property 
involved in conspiracies to commit violations of 18 U.S.C. 
§§ 1956 and 1957 because such conspiracies are charged as viola- 
tions of § 1956 (h) . There is no provision, however, for the 
forfeiture of property involved in conspiracies to violate the 
title 31 money laundering offenses bec ause such conspiracies are 
charged as violations of 18 U.S.C. § 371, a' statute for which 
forfeiture is not presently authorized. The amendment plugs this 
loophole by providing for forfeiture of the property involved in 
a conspiracy to commit any of the offenses listed in § 982(a) (1) 
following a criminal conviction on the conspiracy count. 



54 



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Section 310 Seizure of Vehicles with Concealed Compartments 
Used for Smuggling 

This section amends the seizure and forfeiture provisions of 
the Ant i- Smuggling Act of 1935, 19 U.S.C. § 1703, to subject 
trucks and private automobiles to seizure if there is a concealed 
compartment used for smuggling, whether or not there is 
contraband or narcotics residue. 

Under current law, vessels and aircraft having a hidden 
compartment can be seized and forfeited under 19 U.S.C. §§ 1590 
and 1703. These provisions, however, do not permit the seizure 
and forfeiture of automobiles, trucks, or other vehicles that are 
similarly equipped with hidden compartments designed to smuggle 
contraband. This provision would cover compartments that are" 
specifically built or fitted for smuggling; it would not reach 
other compartments (e.g., glove boxes or car trunks) that are 
part of the normal vehicle configuration. 

Section 311 Forfeiture of Instrumentalities of Terrorism, 
Telemarketing Fraud and Other Offenses 

This section adds new civil and criminal forfeiture provi- 
sions to sections 981 and 982, respectively, to cover the instru- 
mentalities used to commit certain fraud offenses and violations 
of the Explosives Control Act. These provisions are necessary 
because in many such cases forfeiture of the proceeds of the 
offense alone is an inadequate sanction. For example, in a 
computer crime case in which the defendantr^has penetrated the 
security of a computer network, there may not be any proceeds of 
the offense to forfeit, but the perpetrator should be made to 
forfeit the computer or other access device used to commit the 
offense. The description of the articles subject to forfeiture 
in such cases is derived from 18 U.S.C. 492, the forfeiture 
provision for instrumentalities used to commit counterfeiting 
crimes. The reference to specific items such as computers in the 
statutory language is not intended to limit the generic descrip- 
tion of the articles subject to forfeiture to those particular 
items . 

The provision relating to fraud offenses states that only 
property used on a "continuing basis" is subject to forfeiture. 
This is intended to make clear, as many courts have already held, 
that there must be a substantial temporal connection between the 
forfeited property and the act giving rise to forfeiture. Under 
the statute, property otherwise used for lawful purposes will be 
subject to forfeiture if it is used to commit two or more 
offenses, or if it used to commit a single offense that involved 
the use of the property on a number of occasions. On the other 
hand, property otherwise used for lawful purposes would not be 
subject to forfeiture if used only in an isolated instance to 
commit or facilitate the commission of an offense. 

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Section 312 Forfeiture of Vehicles Used in Gun Running 

This section provides for the forfeiture, under 18 U.S.C. 
§§ 981 and 982, of vehicles used to commit gun running crimes, 
such as transporting stolen firearms. The provision is limited 
to instances in which 5 or more firearms are involved, thus 
making it clear that it is not intended to be used in instances 
where an individual commits a violation involving a small number 
of firearms in his personal possession. 

Section 313 Forfeiture of Criminal Proceeds Transported in 
Interstate Commerce 

Section 1952(a) (1) of title 18 makes it a crime to 
distribute the proceeds of an "unlawful activity" in interstate 
commerce. "Unlawful activity" includes gambling, drug 
trafficking, prostitution, extortion, bribery and arson. 18 
U.S.C. § 1952(b). There is, however, no statute authorizing 
forfeiture of the criminal proceeds distributed in violation of 
§ 1952(a) (1) . 

Prosecutors have attempted to work around this problem by 
charging interstate transportation of drug proceeds as a money 
laundering offense under 18 U.S.C. § 1956(a) (1) (B) (i) , an offense 
for which forfeiture of all property involved is authorized. See 
18 U.S.C. §§ 981(a)(1)(A) and 982(a)(1). The courts, however, 
have not endorsed this theory either on the ground that mere 
transportation of drug money is not a -"-financial transaction, " 
see United States v. Puig- Infante . 19 F.3d 929 {5th Cir. 1994) 
(transporting drug proceeds from Fla. to Tex. not a "transaction" 
absent evidence of disposition once cash arrived at destination) , 
or because transporting cash does not, by itself, evidence an 
intent to "conceal or disguise" drug proceeds, see United States 
v. Garcia-Emanuel . 14 F.3d 1469 (10th Cir. 1994) (simple wire 
transfer of proceeds to Colombia evidences no intent to conceal 
or disguise); United States v. Dimeck . 24 F.3d 1239 (10th Cir. 
1994) (covert nature of transportation of funds from one state to 
another not sufficient to imply intent to conceal or disguise) . 

The amendment to § 1952 cures this problem by authorizing 
civil and criminal forfeiture of the proceeds of unlawful 
activity distributed in violation of subsection (a) (1) . In each 
instance, the applicable procedures would be the same as those 
applicable to money laundering forfeitures. 

Section 314 Forfeiture of Proceeds of Federal Food, Drug, and 
Cosmetic Act Violations 

This section creates civil and criminal forfeiture 
provisions for proceeds traceable to Federal Food, Drug, and 
Cosmetic Act (FFDCA) violations codified in chapter 9 of title 21 

56 



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(21 U.S.C. § 301 et seq.). The new forfeiture provisions would 

be additions to chapter 9 (new 21 U.S.C. §§ (civil 

forfeiture) and (criminal forfeiture) ) . 

FFDCA violations are investigated by the Food and Drug 
Administration's Office of Criminal Investigations (FDAOCI) . The 
FFDCA presently provides for forfeiture of only the specific 
articles of food, drugs, or cosmetics that are in violation of 
the FFDCA. See 21 U.S.C. § 334 (seizure, judicial condemnation, 
and court -ordered destruction or sale of adulterated or 
misbranded foods, drugs, or cosmetics, with net proceeds of any 
sale going to the Treasury of the United States) . In order to 
achieve forfeitures of the proceeds of FFDCA violations, FDAOCI 
has to expand FFDCA cases to include additional offenses (e.g., 
mail or wire fraud and the laundering of fraud proceeds) which 
serve as predicate offenses for adoptive forfeitures undertaken 
by other federal law enforcement agencies under statutes outside 
the FFDCA (e.g., 18 U.S.C. §§ 981 and 982). FDAOCI forfeiture 
cases under the FFDCA forfeiture statutes will simplify the 
process by which FDAOCI investigations lead to proceeds 
forfeitures . 

FDAOCI does not seek forfeiture of facilitating property; 
nor does FDAOCI seek administrative forfeiture authority., FDAOCI 
does not want to establish organizational infrastructures for 
managing property seized for facilitating FFDCA violations (e.g. 
factories and warehouses) or for executing administrative 
forfeitures. All forfeitures of articles that are in violation 
of the FFDCA under the existing FFDCA forfeiture statute (21 
U.S.C. § 334) are judicial. 

Section 315 Summary Destruction of Explosives Subject to 
Forfeiture 

This section provides legal authority for the Secretary of 
the Treasury to destroy summarily explosives that are subject to 
forfeiture and that are too dangerous to store pending the 
completion of forfeiture proceedings. The statute provides for 
compensation, up to the value of the destroyed property, to any 
owner or person with an interest in the property who, within a 
period of 90 days, files an application with the Secretary and 
establishes that he or she was an innocent owner of the property. 

Section 316 Archeological Resources Protection Act 

This section expands the forfeiture provisions of the 
Archeological Resources Protection Act of 1979 (16 U.S.C. 
§ 470gg(b)) to include proceeds of a violation of the Act and to 
provide that the procedures governing criminal and civil 
forfeiture in title 18, as amended by the Forfeiture Act, apply 
to such forfeitures. 



57 



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TITLE IV -- MISCELLANEOUS AND MINOR AND TECHNICAL AMENDMENTS 

Section 401 Use of Forfeited Funds to Pay Restitution to Crime 
Victims and Regulatory Agencies 

This section amends the civil and criminal forfeiture sta- 
tutes to make it clear that the forfeited property may be used to 
restore property to victims of the offense giving rise to the 
forfeiture. 

The civil statute, 18 U.S.C. § 981, explicitly authorizes 
the use of forfeited funds to restore property only in cases 
based on the offenses set forth in §§ 981(a) (1) (C) and (D) , most 
of which involve financial institution fraud. At the same 
time, the criminal statute, § 982, permits forfeited funds to be 
restored to victims in virtually all instances. See 21 U.S.C. 
§ 853 (i) incorporated by reference in § 982(b). Taken together, 
these statutes imply that the Attorney General may not use 
forfeited funds to restore property to victims in other civil 
cases -- such as consumer fraud and money laundering. These 
amendments negate that implication by making it clear that the 
Attorney General make use the forfeiture laws to restore property 
to victims in all cases. 

First, subsection (e) (6) , which presently authorizes the 
payment of restitution to victims of any crime listed in 
§ 981(a) (1) (C) , is expanded to cover all offenses for which 
forfeiture is authorized under § 981. In the case of money 
laundering offenses, this includes the offense that constituted 
the underlying "specified unlawful activity." 

Second, subsections (e) (3) , (4) and (5) , which authorize 
restitution to financial institutions in cases governed by 
§ 981(a) (1) (C) , is revised to take into account the fact that not 
all financial institution offenses are covered by subsection 
(a) (1) (C) . See subsection (a) (1) (A) relating to money laundering 
offenses in which the underlying unlawful activity may be a 
financial institution offense. Thus, the_ introduction to each 
subsection, respectively, is amended to refer to "property 
forfeited in connection with an offense resulting in pecuniary 
loss to a financial institution or regulatory agency" regardless 
of what statutory provision is employed to accomplish the forfei- 
ture. 

Third, a similar amendment is made to subsection (e) (7) to 
reflect that not all crimes relating to the sale of assets by 
receivers of failed financial institutions are covered by subsec- 



^ The restitution provisions were enacted as part of the 
Financial Institutions Reform and Recovery Act (FIRREA) of 1989, 
which explains their limitation to these particular offenses. 



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tion (a) (1) (D) , see subsections (a) (1) (A) and (E) , and to elimi- 
nate the need to revise the cross references in .his section in 
the future each time the various subparagraphs of subsection 
(a) (1) are amended or redesignated. 

Finally, the criminal forfeiture provision, which as 
mentioned, is contained in a cross-reference to 21 U.S.C. 
§ 853 (i) (1) , is revised to clarify its application in money 
laundering cases and cases where there are persons who were 
victimized by a the same scheme but not by the particular 
offenses that were the subject of the criminal prosecution. 
Thus, in money laundering cases, property could be restored to 
victims of the offense that constituted the underlying "specified 
unlawful activity, " and in all cases, property could be restored 
to the victim of any offense that was part of the same scheme, 
conspiracy, or pattern of criminal activity, a formulation 
derived from the restitution provision of the Victim and Witness 
Protection Act, 18 U.S.C. § 3663. (It is not necessary to make 
reference to a "scheme" or "pattern" in the civil forfeiture 
statute because civil forfeiture, unlike criminal forfeiture, 
need not be tied to the commission of a specific offense.) 

Section 402 Compliance with Vienna Convention Regarding 

Enforcement of Foreign Drug Forfeiture Orders 

The United States was the eighth country to ratify the 
United Nations Convention Against the Illicit Traffic in Narcotic 
Drugs and Psychotropic Substances (hereinafter the Vienna Conven- 
tion) , and has been under an obligation Lu-meet the Convention's 
requirements since the treaty went into effect on November 11, 
1990. 

Article V of the Vienna Convention requires the member 
nations (the Parties) to enact legislation providing for the 
forfeiture of proceeds and instrumentalities of drug trafficking 
and drug-related money laundering offenses. Specifically, para- 
graph 1 (a) of Article V says that each Party shall adopt measures 
authorizing the forfeiture of "proceeds derived from offenses 
established in accordance with article 3, paragraph 1, [which 
defines the predicate drug and drug-related money laundering 
offenses] , or property the value of which corresponds to that of 
such proceeds . " 

The United States is in full compliance with these require- 
ments insofar as they relate to domestic forfeitures. The drug 
and money laundering forfeiture statutes enacted by Congress 
since 1978 authorize the forfeiture of both drug proceeds and 
property involved in money laundering offenses where the underly- 
ing crime is committed in the United States. The substitute 
assets provisions of these statutes permit the forfeiture of 
property of "equivalent value" when the property traceable to the 
criminal offense is unavailable. See 21 U.S.C. § 853 (p) . In- 

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deed, these statutes frequently serve as models for other Parties 
seeking to comply with the Vienna Convention's requirements. 
Additional legislation, however, will support our compliance with 
the Convention's international forfeiture obligations. 

Under Article V, a Party must provide for the forfeiture of 
drug proceeds derived from an offense occurring in another coun- 
try by providing forfeiture assistance to a Party in whose juris- 
diction the underlying drug or money laundering offense occurred. 
This obligation applies both to the drug proceeds themselves and 
to property of equivalent value . Under 18 U.S.C. § 981(a) (1) (B) , 
the United States can initiate a civil action against foreign 
drug proceeds that would result in the seizure and confiscation 
of such property. But because that statute is a civil i n rem 
statute, it does not authorize the forfeiture of substitute 
assets of equivalent value. 

The proposed statute is intended reinforce our compliance 
with the Vienna Convention in this regard by giving our treaty 
partners access to our courts for enforcement of their forfeiture 
judgments. Under the proposal, once a defendant is convicted of 
a drug trafficking or money laundering offense in a foreign 
country and an order of forfeiture is entered against him, the 
foreign country, as the Party requesting assistance under the 
Vienna Convention, would file a civil action as a plaintiff in 
federal court seeking enforcement of the judgment against assets 
that may be found in the United States. The Requesting Party, 
however, would not be allowed to file for enforcement without 
approval from the United States DepartfflSfit of Justice, thereby 
permitting the United States to screen out requests that are 
factually deficient or based on unacceptable foreign proceedings. 

The concept of placing the Requesting Party in the posture 
of a plaintiff seeking enforcement of a judgment is drawn from 
Canada's Mutual Legal Assistance in Criminal Matters Act. Sec- 
tion 9 of the Act provides, in pertinent part: 

Where the Minister [of Justice] approves a request 
of a foreign state to enforce the payment of a fine 
imposed in respect of an offense by a court of criminal 
jurisdiction of the foreign state, a court in Canada 
has jurisdiction to enforce the payment of the fine and 
the fine is recoverable in civil proceedings instituted 
by the foreign state, as if the fine had been imposed 
by a court in Canada. 

The Justice Department has been informed by Canadian Justice 
Ministry authorities that, although this provision has not yet 
been applied, it is expected to cover foreign criminal forfeiture 
orders. Canada views Section 9 as part of its response to the 
Vienna Convention. 



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Enactment of this proposal woi Id bring the United States 
into line with an important trend in international law enforce- 
ment while preserving our in rem/in personam distinctions and 
without requiring the government to become a party to the en- 
forcement of a foreign order. Laws providing for the enforcement 
of foreign confiscation orders have been enacted by a number of 
jurisdictions, including Australia, Denmark, Hong Kong, Japan, 
the Netherlands, Singapore, and the United Kingdom. We can 
anticipate that more countries will enact laws to give full faith 
and credit to their treaty partners' "equivalent value" forfei- 
ture orders. If we expect such countries to enforce our forfei- 
ture orders against substitute assets located abroad, we must be 
prepared to render reciprocal assistance. 

Section 4 03 Minor and Technical Amendments Relating to 1992 
Forfeiture Amendments 

These are minor and technical corrections to statutes amend- 
ed by the Anti-Money Laundering Act of 1992, the Anti-Car Theft 
Act, and the 1993 Treasury Appropriations bill. 

Subsection (a) amends section 982(b) (2) to clarify, in light 
of additions made to section 982(a) in 1990 and 1992, that the 
substitute asset limitation in that section applies only to money 
laundering cases. 

Subsection (b) makes several clarifying changes to the 
statute authorizing forfeiture of fung ible property in civil 
cases when no property traceable to the underlying offense is 
available. It also makes the statute applicable to all civil 
forfeitures. See United States v. All Funds Presently on Deposit 
at American Express Bank , 832 F. Supp . 542 (E.D.N.Y. 1993) (ques- 
tioning failure to make § 984 applicable to drug offenses) . 

The clarifying changes are necessary to make sure that the 
provisions of § 984, including the limitations set forth in the 
statute, only apply to instances where the government seeks to 
invoke the fungible property provisions of the statute because 
neither the property actually involved in the offense giving rise 
to forfeiture nor any property traceable to it is available for 
forfeiture. If such property is available, there is no need to 
invoke § 984 and none of its provisions would apply. This an- 
swers the question raised in Marine Midland Bank, N.A. v. United 
States . 11 F.3d 1119 {2d Cir. 1993), where the appellate court 
remanded a case to determine if the limitations relating to 
interbank accounts in § 984 applied when property traceable to a 
money laundering offense was forfeited under § 981. 

The amendments also make clear that § 984 does not abrogate 
any other applicable theory of forfeiture. See American Express 
Bank which suggested, in dicta , that § 984 was intended to abro- 
gate the case law authorizing the forfeiture of facilitating 

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property under § 981(a) (1) (A). Under § 984, a court may forfeit 
fungible property in place of any property forfeitable under any 
civil forfeiture statute, including facilitating property if the 
forfeiture of such property is authorized by another statute. 
See United States v. All Monies . 754 F. Supp . 1467, 1473 (D. Haw. 
1991) (facilitating property is forfeitable in money laundering 
cases under § 981(a)(1)(A); United States v. Certain Accounts . 
795 F. Supp. 391, 396 (S.D. Fla. 1992) (same). 

The amendment also extends the period within which the 
forfeiture action must be commenced for the provisions of § 984 
to apply from one year to two years, which is consistent with the 
Senate-passed version of the statute when it was enacted in 1992. 
See American Express Bank , supra (seized property returned to 
Ecuadorian money exchanger despite evidence of drug traffic)cing 
because seizure occurred 18 months after money laundering and 
outside of § 984 's one-year limitations period). The amendment 
makes clear that for the purposes of the limitations period, a 
forfeiture action is "commenced" either when the property is 
seized or when an arrest in rem is served. 

Finally, the amendment provides that a "financial institu- 
tion" includes a foreign bank so that interbank accounts main- 
tained by foreign banks are covered by the provision exempting 
interbank accounts from the application of the rule permitting 
the forfeiture of fungible property. 

Subsection (c) makes similar stylistic changes to section 
986, making it applicable to all § 981 forfeitures including the 
provisions added in 1992, and eliminating the erroneous reference 
to § 1960. The amendment also strikes a meaningless cross-refer- 
ence to a non-existent statute, 18 U.S.C. § 985. 

Subsection (d) amends 18 U.S.C. § 3554, the statute enacted 
as part of the Sentencing Reform Act of 1984 to provide for the 
entry of an order of forfeiture in criminal cases, to reflect the 
enactment of various criminal forfeiture statutes that were not 
in existence at the time of the 1984 legislation. The amendment 
also inserts a reference to Rule 32, Fed.R. Crim. P. , to make clear 
that nothing in § 3 554 is intended to be inconsistent with the 
Rule as it may be amended from time to time. 

Subsection (e) adds an attempt provision to the statute 
making it an offense to fail to file a CMIR form, or to file a 
false or incomplete form. This makes it clear that a person who 
boards a domestic flight in the United States with the intention 
of transferring to an international flight at another airport in 
the United States, and who does so with the intent to evade the 
CMIR reporting requirement, is guilty of the offense at the point 
where he boards or prepares to board the first flight. 
Otherv;ise, the statute could be read to make it impossible to 
take any law enforcement action under the CMIR statutes until 

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such time as the traveller changed planes en route to his 
international destiuation. For example, under the amendment, a 
traveller carrying a large quantity of cash who boards a plane in 
Ohio to fly to New York where he will change planes for a flight 
to South America, will be in violation of 31 U.S.C. § 5324(b) at 
the point when he is about to board the plane in Ohio with the 
intent to evade the CMIR reporting requirement. 

Subsection (f) amends the civil penalty provision of 18 
U.S.C. § 1956. The first new provision is a long arm statute 
that gives the district court jurisdiction over a foreign bank 
that violates the money laundering statute, provided that the 
bank maintains an account in the United States and that the bank 
receives service of process pursuant to the applicable statutes 
or rules of procedure. The purpose of the provision is to ensure 
that a bank that violates the money laundering laws of the United 
States and that conducts banking business through an account in 
the United States does not escape liability under Section 1956 (b) 
by asserting that its contacts with the United States are not 
sufficient to satisfy the "minimum contacts" requirements for in 
personam jurisdiction. The second provision, modeled on 18 
U.S.C. § 1345(b), gives the district court the power to restrain 
property or take other action necessary to ensure that a 
defendant in a § 1956 action does not dissipate the assets that 
would be needed to satisfy a judgment under that section. 

Section 404 Civil Forfeiture of Coins and Currency in 
Confiscated Gambling Devices 

This section makes a change in the civil forfeiture provi- 
sions in the Gam±)ling Devices Act, 15 U.S.C. 1171 et seq. The 
Gambling Devices Act, set out as chapter 24 of title 15, United 
States Code, is a scheme for regulating devices like slot ma- 
chines and other machines used for gambling. In general, the 
chapter makes it illegal to ship such devices into states where 
they are illegal and to use or possess them in areas of special 
federal responsibility such as in the special maritime and ter- 
ritorial jurisdiction and in Indian country. 15 U.S.C. 1175 
provides for the seizure and civil forfeiture of gambling ma- 
chines involved in a violation of the chapter. Occasionally a 
slot machine or video game involved in a violation will contain 
money. This section clarifies that money in such a machine at 
the time it is seized is also subject to seizure and forfeiture. 
Such a forfeiture is justified and the section eliminates any 
need for a complicated procedure under which such a machine would 
have to be opened and the money counted and removed before it can 
be seized. 

Section 405 Drug Paraphernalia Technical Amendments 

Section 511(a) (10) of the Controlled Substances Act (21 
U.S.C. 881(a) (10)) provides for the civil forfeiture of "[a]ny 

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drug paraphernalia (as defined in section 857 of this title)." 
Section 2401 of the Crime Control Act of 19SJ, Pub.L. 101-647, 
104 Stat. 4858, November 29, 1990, transferred 21 U.S.C. 857 
(drug paraphernalia violations) to a new 21 U.S.C. 863 and made 
it part of the Controlled Substances Act. "Drug paraphernalia" 
is defined at 863(d). Paragraph (a) above amends 21 U.S.C. 
881(a) (10) to correct the misreference to the repealed section 
857. 

Prior to enactment of 21 U.S.C. § 863, references in 21 
U.S.C. 881 and 853 to violations of "this subchapter" as bases 
for forfeiture did not include drug paraphernalia violations 
because 21 U.S.C. 857 was part of the Anti-Drug Abuse Act of 
1986. The references to "this subchapter" in 21 U.S.C. 853 and 
881 are actually references to the original legislation (Title II 
of Pub.L. 91-513, October 27, 1970, 84 Stat. 12421 popularly 
known as the "Controlled Substances Act".' See editorial note 
entitled "References in Text" after 21 U.S.C. 801 in West's 
Federal Criminal Code and Rules (1991 Revised Edition) at 962. 
Consequently, the reference to "this title" in 21 U.S.C. 
881(a) (10) should be corrected to "this subchapter" when the 
proposed amendment is codified. 

Section 863 penalizes sale, use of any facility of inter- 
state commerce to transport, and import or export of drug para- 
phernalia with imprisonment for up to three years. Additionally, 
21 U.S.C. 863(c) provides for criminal forfeiture of drug para- 
phernalia involved in a violation of 21 U.S.C. 863 "upon the 
conviction of a person for such violat luii" --and directs forfeited 
drug paraphernalia to be delivered to the Administrator of Gen- 
eral Services, who may order its destruction or authorize its use 
by federal, state, or local authorities for law enforcement or 
educational purposes. Paragraph (b) above deletes section 863(c) 
as unnecessary because 21 U.S.C. 853(a) (2) provides for criminal 
forfeiture of any property used to commit "a violation of this 
subchapter" that is punishable by imprisonment for more than one 
year. Section 863 is such a violation. Deletion of section 
863(c) also removes section 863(c) 's contradiction of section 
853(h) 's provision for disposition of criminally forfeited drug 
paraphernalia by the Attorney General. Disposition of drug 
paraphernalia forfeited civilly under section 881 is also by the 
Attorney General pursuant to 21 U.S.C. 881(e). 

Section 406 Authorization to Share Forfeited Property with 
Cooperating Foreign Governments. 

Section 981 (i) authorizes the sharing of forfeited property 
with foreign governments in certain circumstances. It currently 
applies to all civil and criminal forfeitures under 18 U.S.C. 
§§ 981-82, which are the forfeiture statutes for most federal 
offenses in Title 18. Older parallel provisions applicable only 

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Ill 



to d.-ug cases and Customs cases appear in 21 U.S.C. 

§ 88j. (e) (1) (E) and 19 U.S.C. § 1616a(c)(2), respectively. 

The amendment simply extends the existing sharing authority 
to all other criminal and civil forfeitures, including those 
undertaken pursuant to RICO, the Immigration and Naturalization 
Act, the ant i -pornography and gambling laws, and other statutes 
throughout the United States Code. Because the amendment makes 
the parallel provisions in the drug and customs statutes unneces- 
sary. Section 881(e) is amended to remove the redundancy. 

Section 407 Forfeiture of Counterfeit Paraphernalia 

18 U.S.C. § 492 has provided for the civil forfeiture of 
counterfeiting paraphernalia since 1909. It was last amended in 
1938. The amendments are intended to bring the statute up to 
date and in conformance with modern civil forfeiture statutes by 
cross-referencing procedures pertaining to administrative forfei- 
tures in the customs laws, 19 U.S.C. § 1602 et seq. . and the 
civil forfeiture procedures in 18 U.S.C. § 981-87. The amendment 
also adds a criminal forfeiture provision that cross-references 
the procedures in § 982. 

Section 408 Closing Loophole to Defeat Criminal Forfeiture 
Through Bankruptcy 

These provisions passed the Senate in 1990 as Section 1904 
of S.1970. They would prevent the circumvention of criminal 
forfeiture through the use of forfeitabiy pioperty to satisfy 
debts owed to unsecured general creditors. The limitation to 
those bankruptcy proceedings commenced after or in contemplation 
of criminal proceedings safeguards against interference with 
legitimate bankruptcy filings. 

Section 409 Statute of Limitations for Civil Forfeiture 

The first part of this amendment makes a minor change to the 
wording of the statute of limitations for civil forfeitures. 
Presently, forfeiture actions must be filed within 5 years of the 
discovery of the offense giving rise to the forfeiture. In 
customs cases, in which the property is the offender, this 
presents no problem. In such cases, the discovery of the offense 
and the discovery of the involvement of the property i.i the 
offense, occur simultaneously. 

This provision of the customs laws, however, is incorporated 
into other forfeiture statutes. In those cases, the government 
may be aware of an offense long before it learns that particular 
property is the proceeds of that offense. For example, the 
government may know that a defendant robbed a bank in 1990 but 
not discover that the proceeds of the robbery were used to buy a 
motorboat until 1993. Under current law the forfeiture of the 

65 



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motorboat would be barred by the statute of limitations. The 
amendment rectifies this siti ation by allowing the government 5 
years from the discovery of the involvement of the property in 
the offense to file the forfeiture action. 

The second part of the amendment extends the statute of 
limitations for civil forfeiture proceedings involving banking 
law violations, as enumerated in 18 U.S.C. § 981(a) (1) (C) , to ten 
years. This conforms to the extension, accomplished by section 
2533 of the Crime Control Act of 1990, of the statute of 
limitations for bringing civil actions under section 951 of the 
Financial Institutions Reform, Recovery and Enforcement Act of 
1989 (FIRREA) to ten years. There is no reason to distinguish in 
terms of the applicable period of limitations between civil 
actions for a monetary penalty under section 951 and civil for- 
feiture actions under 18 U.S.C. 981(a) (1) (C) . (The same prin- 
ciple applies to the offenses enumerated in the current law in 
sub-paragraph (D) . Another provision of this Act, however, would 
striJce sub-paragraph (D) and combine it with sub-paragraph (C) . 
Thus, the amendment does not cross-reference sub-paragraph (D) .) 

The extended limitations period would apply to acts giving 
rise to forfeiture that are not time barred when the amendment 
becomes law. 

Section 410 Assets Forfeiture Fund and Property Disposition 

This section makes a variety of minor and technical 
amendments to the statute governing th o ' ucc of the Justice 
Department Assets Forfeiture Fund. Subsection (a) makes 
technical amendments to ensure correct cross-references within 
the statute. This subsection includes a number of conforming 
amendments required by the redesignation of paragraphs in 
§ 524(c) (1) and other statutes, in this Act and in previous 
legislation. Subsection (a) (6) is a technical amendment intended 
to conform with the intent of the Federal Reports Elimination and 
Sunset Act of 1995 (Public Law 104-66) . That Act repealed 
§ 524 (c) (7) (dealing with reports and audits) but failed to 
repeal § 524 (c) (6) which concerns the filing of another annual 
report. The amendment corrects this oversight. 

Subsection (b) amends 28 U.S.C. § 524(c)(8), as redesignated 
in the Section, to provide a set of disposal authorities of the 
Attorney General for forfeited property. These amendments will 
be neutral in their effect on the federal budget. For the most 
part, they merely restate in one place authorities that currently 
exist in several places. This is intended to clarify the 
interplay between the substantive forfeiture statutes, which 
specify the uses that may be made of the forfeited property, and 
§ 524 (c) which authorizes uses to be made of property deposited 
in the Assets Forfeiture Fund. 



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The Attorney General ' s current authority to warrant clear 
title to forfeited property pursuant to 28 U.S.C. § 524(c) (9) 
does not provide for the expenditure of funds to indenmify title 
insurers who rely upon the Attorney General's action but are 
nevertheless found liable if a defect in the title is estab- 
lished. The last sentence of subsection (b) is intended to 
correct this possible defect by authorizing the use of 
appropriated funds for such purposes . 

Subsection (c) makes clear the requirement that any monetary 
amount obtained from settlement in lieu of forfeiture be deposit- 
ed into the Department of Justice Assets Forfeiture Fund. Essen- 
tially, all amounts accepted in lieu of forfeiture would be 
treated in the same manner as the proceeds of sale of a forfeited 
item. 

Subsection (d) is intended only to make clear that the Fund 
may accept deposits of amounts representing reimbursement of 
costs paid by the Fund. 

Subsection (e) amends § 524 (c) (1) to add authority to indem- 
nify foreign governments held liable in connection with assis- 
tance rendered to the United States in a forfeiture action. 
Under current U.S. law, there is no provision allowing the return 
of forfeited property to a foreign country or other entity, such 
as a foreign bank, that suffers foreign legal liability as the 
result of assisting a United States forfeiture action. This 
amendment authorizes the Attorney General to return the forfeited 
property plus-any earned interest in sueh—eircumstances . Without 
assurances that the property plus interest can be returned, a 
number of foreign jurisdictions have been unwilling to seize or 
repatriate property on behalf of the United States. 

Moreover, the international sharing statutes ( i.e. , 18 
U.S.C. § 981(i) and 21 U.S.C. § 881(e)(1)(E)) do not furnish the 
means to address this problem since these statutes provide simply 
for the distribution of forfeited assets among the United States 
and other countries in proportion to the effort each has expended 
in bringing about a forfeiture of property under United States 
law. 

As a result of this vacuum, foreign jurisdictions have 
declined to provide the United States with forfeiture-related 
assistance unless the United States first promises to return the 
property plus interest in the event the seizure or repatriation 
by the foreign authorities results in an adverse judgment against 
the foreign government and those acting at its instructions 
( e.g. . banking officials that wire funds to the United States for 
forfeiture at the behest of the foreign authorities) . Without 
such an agreement, some foreign countries have been unwilling to 
take any risk on the United States' behalf, with the consequence 



67 



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that criminal proceeds have been insulated from our forfeiture 
laws . 

This proposal is meant primarily to satisfy foreign govern- 
ments whose international forfeiture assistance laws have not yet 
been tested in court. Such foreign countries have expressed 
concern that if they repatriate assets (usually drug proceeds on 
deposit in local bank accounts) for forfeiture in the United 
States, and their assistance is later successfully challenged in 
court, the foreign jurisdiction or other entity in question v/ill 
be left to pay damages while the United States confiscates the 
property in question. 

It should be emphasized that this amendment to Section 
524 (c) (1) does not create an obligation to pay, but simply vests 
the Attorney General with the discretion to commit the Fund to 
return property to a cooperating foreign jurisdiction in the 
event of an adverse foreign judgment. This discretion, however, 
is not unfettered. The United States is limited in the amount it 
can transfer to the forfeited property or proceeds plus interest 
earned on the funds, to the extent that the property and interest 
have not already been disbursed to the government in sharing or 
awards. The statute does not authorize other types of payments 
such as damages and attorneys fees. Furthermore, there is a 
v;indow of liability to make clear that the foreign government or 
entity must vigorously defend any action brought against it if it 
wants the return of the monies. In addition, because the time 
the Fund is at risk is limited to five years from the time that a 
final United -States forfeiture judgment— irs -entered against the 
property, exposure is not open-ended. 

Subsection (f ) amends redesignated section 524 (c) (7) (E) to 
provide guidance regarding excess surplus funds remaining in the 
Fund at the end of this and future fiscal years. 

Subsection (g) amends section 524(c) (1) (E) to apply not only; 
to remission and mitigation but also to any other authority givertl 
to the Attorney General by statute. This provision, in addition \\ 
to the amendment to 28 U.S.C. § 524(c) (8) in subsection (b) ! 
clarifies the statutory authority to restore forfeited property J 
to qualified victims from the Department of Justice Assets 
Forfeiture Fund. That provision applies, of course, only to 
property forfeited in a given case and does not permit 
restitution from the Fund generally. 

Section 411 Clarification of 21 U.S.C. S 877 

Section 877 of 21 U.S.C. provides that " (a) 11 final determi- 
nations, findings, and conclusions of the Attorney General under 
this subchapter shall be final... except that any person ag- 
grieved by a final decision of the Attorney General may obtain 
review of the decision in the United States Court of Appeals for 

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the District of Columbia or the circuit in which his principal 
place of business is located upon p -jtition filed with the 
court... ." One court has found that the "express and unambigu- 
ous terms" of Section 877 provided the court of appeals with 
jurisdiction to review on direct appeal a denial of a petition 
for remission or mitigation of the forfeiture of property by an 
agency. Scarabin v. PEA . 925 F.2d 100, 100-01 {5th Cir. 1991) . 
This decision was recently upheld in Clubb v. FBI . No. 93-4 912 
{5th Cir. Feb. 28, 1994) (unpublished) . 

The decision in Scarabin is contrary to the statutory lan- 
guage and legislative history of Section 877 which show that 
Congress intended judicial review only for those decisions of the 
Attorney General affecting the pharmaceutical and research in- 
dustries. The amendment clarifies the meaning of Section 877 by 
excluding the review of decisions of the Attorney General or her 
designees relating to the seizure, forfeiture, and disposition of 
forfeited property, including rulings on petitions for 
remission or mitigation. 

Section 412 Certificate of Reason5±>le Cause 

This section makes a technical amendment to 28 U.S.C. § 2465 
to provide that a certificate of reasonable cause shall be issued 
in appropriate circumstances whether the property in question was 
seized or merely arrested pursuant to an arrest warrant in rem . 
The amendment is necessary in light of the Supreme Court's de- 
cision in United States v. James Daniel Good Property . 114 S. Ct . 
492 (19 93) which explained that the govexnraent need not seize 
real property for forfeiture but may instead post the property 
with an arrest warrant issued pursuant to the Admiralty Rules and 
file a lis pendens . 

Section 413 Conforming Treasury and Justice Funds 

This section makes several changes to the statute authoriz- 
ing the creation of the Treasury Department's Assets Forfeiture 
Fund to make the administration of the Fund more like the admin- 
istration of the Justice Assets Forfeiture Fund. It makes one 
change to the Justice Fund statute for the same purpose. 

Section 414 Disposition of Property Forfeited Under Customs 
Laws 

This section fills a gap in the current law regarding the 
authority of the Secretary of the Treasury to dispose of forfeit- 
ed property in Customs cases by sale or other commercially feasi- 
ble means. The amendment adds the authority currently available 
under other statutes, such as 21 U.S.C. § 881(e), to 19 U.S.C. 
§ 1616a. This provision is intended to increase the options 
available and not to impose a preference for one method of 
disposal of property over another. 

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"ection 415 Technical Amendments Relating to Obliterated Motor 
Vehicle Identification Numbers 

This section contains minor conforming amendments to 18 
U.S.C. § 512, the civil forfeiture statute governing motor vehi- 
cles and parts with obliterated serial numbers. The amendments 
cross-reference the new procedural statutes in sections 981-87 
and, in particular, the innocent owner defense in section 983. 

Section 416 Fugitive Disentitlement 

This provision authorizes the district court to bar a 
fugitive from justice from attempting to hide behind his fugitive 
status while contesting a civil forfeiture action against his 
property. It reinstates what is commonly known as the fugitive 
disentitlement doctrine under which "a person who is a fugitive 
from justice may not use the resources of the civil legal system 
while disregarding its lawful orders in a related criminal 
action." United States v. Enq , 951 F.2d 461, 464 (2d Cir. 1991) 
(applying the doctrine to bar an appellant who was resisting 
extradition from participating in related civil forfeiture 
proceedings) . 

Enq and similar cases in other circuits applied a judicially 
created rule intended to protect the integrity of the judicial 
process from abuse by a fugitive in a criminal case. But in 

Deqen v. United States , S. Ct . , 1996 WL 305720 (1996), 

the Supreme Court held that as a judge-made rule, the sanction of 
absolute disentitlement goes too far. TTT^the absence of 
legislative authority to bar a fugitive from filing a claim, 
courts must resort to other devices to prevent a fugitive from 
abusing the discovery rules or otherwise taking advantage of his 
fugitive status in litigating a civil forfeiture case, such as 
imposing sanctions for failure to comply with discovery orders. 

These devices, however, are not adequate to address the 
problems that arise when fugitives contest forfeiture actions. 
Moreover, if a forfeiture action involves a business, perishable 
property, or any other asset whose value depreciates with time, 
the government cannot simply stay the civil case until the 
fugitive is apprehended. In such cases, delay is prejudicial to 
the government, "for if its forfeiture claims are good, its right 

to the properties is immediate." Deqen , S. Ct . at . 

Finally, as the Supreme Court acknowledged, the law should not 
encourage "the spectacle of a criminal defendant reposing in 
Switzerland, beyond the reach of our criminal courts, while at 
the same time mailing papers to the court in a related civil 
action and expecting them to be honored." Id. 

This provision addresses these concerns through legislation, 
thus imposing the straightforward sanction of disentitlement that 
judges by themselves are not able to impose without statutory 

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authorization. Under the proposal, the doctrine would apply in 
all civil forfeiture cases such as Eng as well as the ancillary 
proceedings in criminal forfeitures in which fugitive third- 
parties might otherwise be able to file claims. For the purposes 
of this provision, a fugitive from justice would be any person 
who, in order to avoid criminal prosecution, purposely leaves the 
jurisdiction or decides not to return to it. See 951 F.2d at 
464. 

Section 417 Admissibility of Foreign Records 

This section adds a new provision to Title 28 to allow 
foreign-based records of a regularly conducted activity, obtained 
pursuant to an official request, to be authenticated and admitted 
into evidence in a civil proceeding, including civil forfeiture 
proceedings, notwithstanding the requirements of F.R.Evid. Rules 
803(6) and 901(a) (1), by means of a certificate executed by a 
foreign custodian (or other person familiar with the 
recordkeeping activities of the institution maintaining the 
records) . This new provision would be the civil analog to 18 
U.S.C. § 3505. 

To make foreign records of a regularly conducted activity 
admissible in a civil proceeding under current law, F.R.Evid. 
Rules 803(6) and 901(a)(1) currently require that a foreign 
custodian or other qualified witness give testimony, either by 
appearing at a proceeding, or in a deposition taken abroad and 
introduced at the proceeding, establishing a record-keeping 
exception to the hearsay rule (under Rul£„aD3(6)) and 
authentication (under 901(a)(1)). 

There is, however, no means by which we can compel the 
attendance of a foreign custodian or other qualified foreign 
witness at a U.S. proceeding to testify. Thus, to adduce the 
requisite testimony we must (1) rely on the prospective witness' 
willingness to voluntarily appear (which is very rare and subject 
to vicissitude) or (2) attempt to obtain a foreign deposition of 
the witness. The latter process is unduly cumbersome (when 
measured in terms of the objective, i.e., to make records 
admissible) and may not be available in many situations, 
especially under administrative agreements, such as a tax treaty. 

By enacting a civil analog to 18 U.S.C. § 3505, which 
provides for the admissibility of foreign business records in 
criminal cases, this provision would provide for a streamlined 
process for making foreign records of a regularly conducted 
activity admissible without having to either (1) rely on having a 
foreign witness voluntary travel to the U.S. and appear at a 
civil proceeding or (2) get involved in the unduly cumbersome 
process of deposing the witness abroad. 

Section 418 Amendment to FIRREA Act of 1989 

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118 



This section extends a provision in the FIRREA Act of 1989 
that authorizes the use of grand jury information by government 
attorneys in civil forfeiture cases. 

Under current law, a person in lawful possession of grand 
jury information concerning a banking law violation may disclose 
that information to an attorney for the government for use in 
connection with a civil forfeiture action under 18 U.S.C. 
§ 981(a) (1) (C) . This provision makes it possible for the govern- 
ment to use grand jury information to forfeit property involved 
in a bank fraud violation; it does not permit disclosure to 
persons outside of the government, nor does it permit government 
attorneys to use the information for any other purpose. 

The limitation to forfeiture under § 981(a) (1) (C) for 
"banking law" violations, however, is obsolete. Since 1989, 
subparagraph (C) has been amended to provide for the forfeiture | 
of the proceeds of other financial crimes and thus is no longer 
limited to banking law violations. Accordingly, the amendment 
strikes "concerning a banking law violation" so that disclosure 
under 18 U.S.C. § 3322(a) will be permitted in regard to any 
forfeiture of proceeds within the scope of § 981(a) (1) (C) . The 
restrictions regarding the persons to whom disclosure may be made 
and the use that may be made of the disclosed material will 
remain unchanged. 

Section 419 Prospective Application 

This section provides that the am endm ents made in this Act 
to the forfeiture laws are intended to apply prospectively. In 
the case of the amendments to the customs laws, Admiralty Rules, 
and other statutes affecting administrative forfeitures and the 
procedure for filing a claim and cost bond to initiate a judicial 
civil forfeiture, the new provisions would apply to seizures 
occurring 60 days after the effective date of the Act. The new 
trial procedures governing judicial civil forfeitures would appl', 
to cases in which the complaint was filed by the government at 
least 60 days after the effective date of the Act. Changes to 
the procedures governing criminal forfeitures would apply to 
indictments returned on or after the effective date. Finally, 
changes to the substantive forfeiture statutes, such as those 
that expand forfeiture to apply to offenses for which forfeiture I 
has not previously been available as a remedy, would apply to 
offenses occurring on or after the effective date. 



72 






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A BILL 

Be it enacted by the Senate and House of Representatives of 
the United States in Congress assembled, 

SEC. 1. SHORT TITLE. 

This Act may be cited as the Forfeiture Act of 1996. 

SEC. 2. TABLE OF CONTENTS 

TITLE I -- CIVIL FORFEITURE 
Subtitle A - Administrative Forfeitures 
Sec. 101. Time for Filing Claim; Waiver of Cost Bond 
Sec. 102. Jurisdiction and Venue 

Sec. 103. Judicial Review of Administrative Forfeitures 
Sec. 104. Judicial Forfeiture of Real Property 
Sec. 105. Preservation of Arrested Real Property 
Sec. 106. Amendment to Federal Tort Claims Act Exceptions 
Sec. 107. Pre- Judgment Interest 

Subtitle B - Judicial Forfeitures 
Sec. 121. Judicial Forfeiture Proceedings 
Sec. 122. Time for Filing Claim and Answer 
Sec. 123. Uniform Innocent Owner Defense 



120 



Sec. 124. Stays 

Sec. 125. Application of Forfeiture Procedures 

Subtitle C - Seizures and Investigations 

Sec. 131. Seizure Warrant Requirement 

Sec. 132. Civil Investigative Demands 

Sec. 133. Access to Records in Bank Secrecy Jurisdictions 

Sec. 134. Access to Other Records 

Sec. 13 5. Currency Forfeitures 

TITLE II -- CRIMINAL FORFEITURE 

Sec. 201. Standard of Proof for Criminal Forfeiture 

Sec. 202. Non-Abatement of Forfeiture When Defendant Dies Pending j 
Appeal 

Sec. 203 Repatriation of Property Placed Beyond the Jurisdiction 
of the Court 

Sec. 204. Motion and Discovery Procedures for Ancillary 
Proceedings 

Sec. 205. Pre-Trial Restraint of Substitute Assets 

Sec. 206. Defenses Applicable to Ancillary Proceedings in 
Criminal Cases 

Sec. 207. Uniform Procedures for Criminal Forfeiture 

Sec. 208. Criminal Seizure Warrants 

Sec. 209. Forfeitable Property Transferred to Third Parties 

Sec. 210. Right of Third Parties to Contest Forfeiture of 
Substitute Assets 

Sec. 211. Hearings on Pre-trial Restraining Orders; Assets Needed 
to Pay Attorneys Fees 

Sec. 212. Availability of Criminal Forfeiture 

Sec. 213. Appeals in Criminal Forfeiture Cases 

Sec. 214. Discovery Procedure For Locating Forfeited Assets 

2 



121 



Sec. 215. Scope of Criminal Forfeiture 

TITLE III -- PROPERTY SUBJECT TO FORFEITURE 

Sec. 301. Forfeiture of Proceeds of Federal Crimes 

Sec. 302. Uniform Definition of Proceeds 

Sec. 3 03. Forfeiture of Firearms Used in Crimes of Violence and 
Felonies 

Sec. 304. Forfeiture of Proceeds Traceable to Facilitating 
Property in Drug Cases 

Sec. 305. Forfeiture for Alien Smuggling 

Sec. 306. Forfeiture of Proceeds of Certain Foreign Crimes 

Sec. 307. Forfeiture of Property Used to Facilitate Foreign Drug 
Crimes 

Sec. 308. Forfeiture for Violations of Section 60501 

Sec. 309. Criminal Forfeiture for Money Laundering Conspiracies 

Sec. 310. Seizure of Vehicles with Concealed Compartments Used 
for Smuggling 

Sec. 311. Forfeiture of the Instrumentai*ti-es of Terrorism, 
Telemarketing Fraud and Other Offenses 

Sec. 312. Forfeiture of Vehicles Used for Gun Running 

Sec. 313. Forfeiture of Criminal Proceeds Transported in 
Interstate Commerce 

Sec. 314. Forfeiture of Proceeds of Federal Food, Drug, and 
Cosmetic Act Violations 

Sec. 315. Summary Destruction of Explosives Subject to Forfeiture 

Sec. 316. Archeological Resources Protection Act 

TITLE IV -- MISCELLANEOUS AND MINOR AND TECHNICAL AMENDMENTS 

Sec. 401. Use of Forfeited Funds to Pay Restitution to Crime 
Victims and Regulatory Agencies 

Sec. 402. Enforcement of Foreign Forfeiture Judgment 

Sec. 403. Minor and Technical Amendments Relating to 1992 
Forfeiture Amendments 



122 

Sec. 404. Civil Forfeiture of Coins and Currency in Confiscated *; 
Gambl Ing Devices | 

Sec. 405. Drug Paraphernalia Technical Amendments 

Sec. 406. Authorization to Share Forfeited Property with 
Cooperating Foreign Governments. 

Sec. 407. Forfeiture of Counterfeit Paraphernalia 

Sec. 408. Closing of Loophole to Defeat Forfeiture Through 
Bankruptcy 

Sec. 409. Statute of Limitations for Civil Forfeiture Actions 

Sec. 410. Assets Forfeiture Fund and Property Disposition 

Sec. 411. Clarification of 21 U.S.C. § 877 

Sec. 412. Certificate of Reasonable Cause 

Sec. 413. Conforming Treasury and Justice Funds 

Sec. 414. Disposition of Property Forfeited Under Customs Laws 

Sec. 415. Technical Amendments Relating to Obliterated Motor 
Vehicle Identification Numbers 

Sec. 416. Fugitive Disentitlement ■ — - 

Sec. 417. Admissibility of Foreign Business Records 

Sec. 418. Amendment to Financial Institutions Reform and Recover 
Act of 1989 

Sec. 419. Prospective Application 

TITLE I -- CIVIL FORFEITDRE 

Subtitle A - Administrative Forfeitures 

SEC. 101. TIME FOR FILING CLAIM; WAIVER OF COST BOND 

(a) IN GENERAL.-- Section 608 of the Tariff Act of 1930 (19 

U.S.C. § 1608) is amended to read as follows: 



"SEC. 608. Seizures; Claims; Judicial condemnation. 



I 



123 



" (a) Any person claiming seized property may file a 
claim with the appropriate customs officer at any time after 
the seizure, provided that such claim must be filed not 
later than 30 days after the final publication of notice of 
seizure. The claim shall be signed by the claimant under 
penalty of perjury and shall set forth the nature and extent 
of the claimant ' s ownership interest in the property and how 
and when it was acquired. 

" (b) Any claim filed pursuant to subsection (a) shall 
include the posting of a bond to the United States in the 
sum of $5,000 or 10 percent of the value of the claimed 
property, whichever is lower, but not less than $250, with 
sureties to be approved by the customs officer with whom the 
claim is filed. No bond shall be required, however, if the 
claim is' filed in forma pauperis WTtfh" all supporting 
information as required by the seizing agency. The Attorney 
General and the Secretary of the Treasury, with respect to 
matters within their respective jurisdiction, shall have the 
authority to waive or reduce the bond requirement in any 
category of cases where he or she determines that the 
posting of a bond is not required in the interests of 
justice. 

" (c) Upon the filing of a claim pursuant to this 
section, the customs officer shall transmit the claim, with 
a duplicate list and description of the articles seized, to 
the United States attorney for a district in which a 



124 



forfeiture action could be filed pursuant to title 28, 
United States Code, Section 1355(b), who shall proceed to a 
condemnation of the merchandise or other property in the 
manner prescribed in the Supplemental Rules for Certain 
Admiralty and Maritime Claims." 
(b) CONFORMING AMENDMENT.-- Section 609 of the Tariff Act of 

1930 (19 U.S.C. § 1609) is amended by striking "twenty" and 

inserting "30" . 

SEC. 102. JURISDICTION AND VENUE. 

(a) TRANSMITTAL TO THE U.S. ATTORNEY.-- Section 610 of the 
Tariff Act of 1930 (19 U.S.C. § 1610) is amended by striking "the 
district in which the seizure was made" and inserting "a district 
in which a forfeiture action could be filed pursuant to title 
28, United States Code, Section 1355(b)". 

(b) ADMIRALTY RULES.-- The Supplemental Rules for Certain 
Admiralty and Maritime Claims are amended -- 

(1) in Rule E(3), by inserting the following at the end of 
paragraph (a) : "This provision shall not apply in forfeiture 
cases governed by 28 U.S.C. § 1355 or any other statute providing 
for service of process outside of the district."; and 

(2) in Rule C(2), by inserting the following after "that it 
is within the district or will be during the pendency of the 
action.": "If the property is located outside of the district, 
the complaint shall state the statutory basis for the court's 
exercise of jurisdiction over the property" . 



125 



SEC. 103. JUDICIAL REVIEW OF ADMINISTRATIVE FORFEITURES. 

Section 609 of the Tariff Act of 1930 (19 U.S.C. § 1609) is 

amended by adding the following new subsection: 

" (d) Where no timely claim to the seized property is 
filed, and a declaration of forfeiture is entered pursuant 
to this section by the seizing agency, the declaration shall 
be final and not subject to judicial review under any other 
provision of law except as follows: If a claimant, upon the 
filing of an action to set aside a declaration of forfeiture 
under this section, establishes by a preponderance of the 
evidence 1) that the seizing agency failed to comply with 
the notice requirements of Section 607, and 2) that the 
claimant had no other notice of the forfeiture proceeding 
within the period for filing a claim, the district court 
shall order that the declaration Qf_j£.orf eiture be set aside 
pending the filing of a claim and posting of a bond and the 
transmittal of the claim to the United States Attorney in 
accordance with Section 608. An action to set aside a 
declaration of forfeiture under this section must be filed 
within 2 years of the last date of publication of notice of 
the forfeiture of the property." 

SEC. 104. JUDICIAL FORFEITURE OF REAL PROPERTY 

Section 610 of the Tariff Act of 1930 {19 U.S.C. 1610) is 

amended by adding at the end the following sentence. 



35-668 96-5 



126 



"Notwithstanding any other provision of law, all forfeitures 
of real property and interests in real property shall proceed as 
judicial forfeitures as provided in this section." 
SEC. 105. PIIESERVATION OF ARRESTED REAL PROPERTY 

Rule E of the Supplemental Rules for Certain Admiralty and 
Maritime Claims is amended by adding the following new subsec- 
tion: 

" (10) Preservation of Property. Whenever property is at- 
tached or arrested pursuant to the provisions of Rule 
E(4) (b) that permit the marshal or other person having the 
warrant to execute the process without taking actual posses- 
sion of the property, and the owner or occupant of the 
property is thereby permitted to remain in possession, the 
court, on the motion of any party or on its own motion, 
shall enter any order necessary to-p*«6erve the value of the 
property, its contents, and any income derived therefrom, 
and to prevent the destruction, removal or diminution in 
value of such property, contents and income." 
SEC. 106. AMENDMENT TO FEDERAL TORT CLAIMS ACT EXCEPTIONS 

Section 2680(c) of title 28, United States Code, is amended 
to read as follows: 

" (c) Any claim arising in respect of the assessment or 
collection of any tax or customs duty, or the detention of 
any goods, merchandise, or other property by any law en- 
forcement officer performing any official law enforcement 
function, except that the provisions of this chapter and 

8 



127 



section 1346 (b) of this title shall apply to any claim based 
on the negligent destruction, injury, or loss of goods, 
merchandise, or other property while in the possession of 
any law enforcement agency if the property was seized for 
the purpose of forfeiture and no forfeiture proceedings are 
pending against the property. 

SEC. 107. PRE-JUDGMENT INTEREST. 

(a) IN GENERAL.-- Section 2465 of title 28, United States 

Code, is amended by -- 

(1) designating the present matter as subsection (a) ; and 

(2) inserting the following new subsection: 

" (b) Interest. Upon entry of judgment for the claimant 
in any proceeding to condemn or forfeit property seized or 
arrested under any Act of Congress, the United States shall 
be liable for post- judgment interesi^^^as set forth in section 
1961 of this title. The United States shall not be liable 
for pre-judgment interest, except that in cases involving 
currency or other negotiable instruments, the United States 
shall disgorge to the claimant any funds representing inter- 
est actually paid to the United States from the date of 
seizure or arrest of the property that resulted from the 
investment of the property in an interest -bearing account or 
instrument. The United States shall not be required to 
disgorge the value of any intangible benefits nor make any 
other payments to the claimant not specifically authorized 
by this subsection." 



128 



(b) EFFECTIVE DATE.-- The amendment made by subsection (a) 

shall apply to any judgment entered after the date of enactment 

of this Act. 

Subtitle B - Judicial Forfeitures 

SEC. 121. TRIAL PROCEDURE FOR CIVIL FORFEITURE 

(a) IN GENERAL.-- Chapter 46 of title 18, United States 

Code, is amended by inserting the following new section: 
"§ 987. Judicial forfeiture proceedings 

"(a) Complaint. The Attorney General may file a civil 
forfeiture complaint in the manner set forth in the Supple- 
mental Rules for Certain Admiralty and Maritime Claims. In 
cases where the applicable law authorizes the institution of 
civil and criminal forfeiture proceedings in connection with 
an offense, the Attorney General shall have the discretion 
to determine whether to file a ci vil complaint under this 
section, a criminal complaint, indictment or information 
including a forfeiture count in accordance with the applica- 
ble criminal forfeiture statute, or both civil and criminal 
actions. Where a civil complaint and a related criminal 
complaint, indictment or information are pending at the same 
time, they shall be considered a single, unified proceeding 
for purposes of the Double Jeopardy Clause of the Fifth 
Amendment . 

"(b) Time for filing complaint. (1) If property is 
seized and a claim is filed pursuant to section 608 of the 
Tariff Act of 1930 (19 U.S.C. § 1608), or if the seizure is 

10 



129 



referred to the Attorney General pursuant to section 610 (19 
U.S.C. § 1610), the Attorney General shall determine as soon 
as practicable whether a forfeiture action should be insti- 
tuted. 

" (2) If the Attorney General determines not to insti- 
tute a forfeiture action, he or she shall so advise the 
seizing agency. A decision not to institute a forfeiture 
action shall not preclude the seizing agency from transfer- 
ring or returning the seized property to a state or local 
law enforcement authority for appropriate forfeiture action 
in accordance with state law. Nor shall a decision not to 
institute a forfeiture action imply that the action of the 
seizing agency in seizing the property was in any way im- 
proper. 

"(3-) If the Attorney General _det.ermines that a forfei- 
ture action should be instituted, he or she shall institute 
such action as soon as practicable, taking into account the 
status of any criminal investigation to which the forfeiture 
action may be related. 

" (c) Claim and answer. A claim and answer to a civil 
forfeiture complaint shall be filed in accordance with 
Rule C of the Supplemental Rules for Certain Admiralty and 
Maritime Claims and shall set forth the nature and extent of 
the claim.ant ' s ownership interest in the property, the time 
and circumstances of the claimant's acquisition of the 
interest in the property, and any additional facts support - 

11 



130 



ing the claimant's standing to file a claim challenging the 
forfeiture action. 

"(d) Standing. The claimant shall have the burden of 
establishing standing to file the claim by virtue of an 
ownership interest, as defined in section 983(c) of this 
title, in the specific property subject to forfeiture. The 
assertion in the claim regarding the nature and extent of 
the claimant's ownership interest in the property shall be 
sufficient to establish standing unless the government, at 
or prior to trial, files a motion to dismiss the claim for 
lack of standing. Upon the filing of such motion by the 
government, the court shall conduct a hearing, in the manner 
provided in Rule 43(e), Federal Rules of Civil Procedure, 
and shall determine pre-trial whether the claimant has 
established, by a preponderance of — Ctre evidence, that he or 
she has the requisite ownership interest in the property to 
challenge the forfeiture action. If the court determines 
that a claimant lacks standing, it shall dismiss the claim 
with prejudice and enter a final judgment as to that claim- 
ant . 

"(e) Burden of proof. At trial in a civil forfeiture 
case, the government shall have the initial burden of prov- 
ing that the property is subject to forfeiture by a prepon- 
derance of the evidence. If the government proves that the 
property is subject to forfeiture, the claimant shall have 
the burden of proving by a preponderance of the evidence 

12 



131 



that he or she has an interest in the property that is not 
forfeitable under section 983 of this title. If the govern- 
ment's theory of forfeiture is that the property facilitated 
the commission jf a criminal offense, the government must 
establish that there was a substantial connection between 
the property and the offense. 

"(f) Affirmative defenses. The claimant shall set 
forth all affirmative defenses, including constitutional 
defenses, in his or her answer, as provided in Rule 8, 
Fed. R. Civ. P. , and shall comply with discovery requests 
regarding such defenses in advance of trial. However, the 
claimant shall not be required to adduce any evidence in 
support of any affirmative defense at trial until the court 
has determined, pursuant to Rule 50, Fed. R. Civ. P. , that 
there is a legally sufficient evidentiary basis for a rea- 
sonable finder of fact, based on all of the admissible 
evidence and any adverse inferences that might apply, to 
find that the property was subject to forfeiture. 

"(g) Motion to suppress seized evidence. At any time 
after a claim and answer are filed, a claimant with standing 
to contest the seizure of the property may move to suppress 
such property in accordance with the normal rules regarding 
the suppression of evidence. If the claimant prevails on 
such motion, the property shall not be admitted into evi- 
dence as to that claimant at the forfeiture trial. However, 
a finding that property should be suppressed shall not bar 

13 



132 



the forfeiture of the property based on evidence obtained 
independently before or after the seizure. 

"(h) Use of hearsay at pre-trial hearings. At any pre- 
trial hearing under this section, the cjurt may accept and 
consider hearsay otherwise inadmissible under the Federal 
Rules of Evidence. The court shall not require the govern- 
ment to reveal the identity of any confidential informant at 
a pre-trial hearing if there are sufficient indicia of 
reliability regarding such testimony to allow the statement 
of such informant to be related by a law enforcement offi- 
cer. 

" (i) Adverse inferences. The assertion by the claimant 
of any Fifth Amendment privilege against compelled testimony 
in the course of the forfeiture proceeding, including pre- 
trial discovery, shall give rise tii_an„ adverse inference 
regarding the matter on which such privilege is asserted. 
The government may rely on such adverse inference in support 
of its burden to establish the forfeitability of the proper- 
ty and in response to any affirmative defense. However, the 
government may not rely solely on such adverse inferences to 
satisfy its burden of proof. 

"(j) Stipulations. Notwithstanding the claimant's 
offer to stipulate to the forfeitability of the property, 
the government shall be entitled to present evidence to the 
finder of fact on that issue before the claimant presents 
any evidence in support of any affirmative defense. 

14 



133 



" (k) Preservation of property subject to forfeiture. 

The court, before or after the filing of a forfeiture com- 
plaint and on the application of the government, may: 

" (1) enter any restraining order or injunction purouant 
to section 413(3) of the Controlled Substances Act (21 
U.S.C. § 853 (e) ) ; 

" (2) require the execution of satisfactory performance 
bonds ; 

"(3) create receiverships; 

" (4) appoint conservators, custodians, appraisers, 
accountants or trustees; or 

" (5) take any other action to seize, secure, maintain, 
or preserve the availability of property subject to forfei- 
ture under this section. 

" (1) Release of property to pay-criminal defense costs. 

" (1) A person charged with a criminal offense may apply 
for the release of property seized for forfeiture to pay the 
necessary expenses of the person's criminal defense. Such 
application shall be filed with the court where the forfei- 
ture proceeding is pending. 

" (2) When an application is filed pursuant to paragraph 
(1) , the burden shall first be upon the applicant to es- 
tablish that he has no access to other assets adequate for 
the payment of criminal defense counsel, and that the inter- 
est in property to be released is not subject to any claim 
other than the forfeiture. The government shall have an 

15 



134 



opportunity to cross-examine the applicant and any v;itnesses 
he or she may present on this issue. 

" (3) If the court determines that the applicant has met 
the requirements set fortn in paragraph (2) , the court shall 
hold a probable cause hearing at which the applicant shall 
have the burden of proving the absence of probable cause for 
the forfeiture of the property. If the court finds that 
there is no probable cause for the forfeiture, it shall 
order the release of the assets for which probable cause is 
lacking. Otherwise, it shall dismiss the application. The 
court shall not consider any affirmative defenses to the 
forfeiture at the probable cause hearing. 

" (m) Excessive Fines. . At the conclusion of the trial 
and following the entry of a verdict of forfeiture, the 
claimant -may petiition the court to-eletermine whether the 
Excessive Fines Clause of the Eighth Amendment applies, and 
if so, whether forfeiture is excessive. The claimant shall 
have the burden of establishing that a forfeiture is exces- 
sive by a preponderance of the evidence at a hearing con- 
ducted in the manner provided in Rule 43 (e) , Federal Rules 
of Civil Procedure, by the Court without a jury. If the 
court determines that the forfeiture is excessive, it shall 
adjust the forfeiture to the extent necessary to avoid the 
Constitutional violation. 

" (n) Applicability. This section shall apply to any 
judicial forfeiture action brought pursuant to this title, 

16 



135 



the Controlled Substances Act, or the Immigration and Natu- 
ralization Act of 1952. Section 615 of the Tariff Act of 
1930 (19 U.S.C. § 1615) shall not apply to forfeitures under 
this section, nor shall this section apply to forfeitures 
under the customs laws . 

" (o) Abatement. A civil forfeiture action or judgment 
under this or any other provision of federal law shall not ' 
abate because of the death of any person." 
(b) REBUTTABLE PRESUMPTIONS.-- Section 981 of title 18, 
United States Code, is amended by adding the following new 
subsection: 

" (k) Rebuttcible presumptions. (1) At the trial of an 
action brought pursuant to subsection (a) (1) (B) , there is a 
presumption, governed by Rule 301 of the Federal Rules of 
Evidence', that the property is su bjec t- to forfeiture if the 
United States establishes, by a preponderance of the evi- 
dence, that such property was acquired during a period of 
time when the person who acquired the property was engaged 
in an offense against a foreign nation described in subsec- 
tion (a) (1) (B) or within a reasonable time after such peri- 
od, and there was no likely source for such property other 
than such offense. i 

" (2) At the trial of an action brought pursuant to 
subsection (a) (1) (A) , there is a presumption, governed by 
Rule 3 01 of the Federal Rules of Evidence, that the property 
was involved in a violation of section 1956 or 1957 of this 

17 



136 



title if the United States establishes, by a preponderance 
of the evidence, two or more of the following factors: 

" (A) the property constitutes or is traceable to more 
than $10,000 that has been or was intended to be transport- 
ed, transmitted or transferred to or from a major drug- 
transit country, a major illicit drug producing country, or 
a major money laundering country, as those terms are deter- 
mined pursuant to sections 481(e) and 490(h) of the Foreign 
Assistance Act of 1961 (22 U.S.C. §§ 2291(e) and 2291j (h) ) ; 

" (B) the transaction giving rise to the forfeiture 
occurred in part in a foreign country whose bank secrecy 
laws have rendered the United States unable to obtain re- 
cords relating to the transaction by judicial process, 
treaty or executive agreement; 

" (C> a person more than miniraaiiy- involved in the tran- 
saction giving rise to the forfeiture action (i) has been 
convicted in any State, Federal, or foreign jurisdiction of 
a felony involving money laundering or the manufacture, 
importation, sale or distribution of a controlled substance, 
or (ii) is a fugitive from prosecution for such offense; or 

" (D) the transaction giving rise to the forfeiture 
action was conducted by, to or through a shell corporation 
not engaged in any legitimate business activity in the 
United States. 



18 



137 



"(3) For the purposes of this paragraph, 'shell cor- 
poration' means any corporation that does not conduct any 
ongoing and significant commercial or manufacturing business 
or any other form of commercial operation. 

" (4) The enumeration of presumptions in this subsection 
shall not preclude the development of other judicially 
created presumptions." 
(c) CONFORMING AMENDMENT.-- The chapter analysis for chapter 

46 of title 18, United States Code, is amended by inserting the 

following at the appropriate place: 

"987. Judicial forfeiture proceedings" 

SEC. 122. TIME FOR FILING CLAIM AND ANSWER. 

Rule C{6) of the Supplemental Rules for Certain Admiralty 

and Maritime Claims is amended by striking "10 days after the 

process has been executed" and inserting — u-20 days after the 

receipt of actual notice of the execution of the process or the 

final publication of such notice as provided in subsection (4), 

whichever is earlier,". 

SEC. 123. UNIFORM INNOCENT OWNER DEFENSE. 

(a) IN GENERAL.-- Chapter 46 of title 18, United States 

Code, is amended by inserting after Section 982 the following new 

section: 

"983. Innocent Owners. 

"(a) An innocent owner's interest in property shall not 
be forfeited in any judicial action under any civil forfei- 



19 



138 



ture provision of this title, the Controlled Substances Act, 
or the Immigration and Naturalization Act of 1952. 

"(b) (1) With respect to a property interest in exis- 
tence at the time the illegal act giving rise to forfeiture 
took place, a person is an innocent owner if he or she 
establishes, by a preponderance of the evidence, -- 

" (A) that he or she did not know that the property 

was involved in or was being used in the commission of 

such illegal act, or 

" (B) that upon learning that the property was 

being used in the commission of such illegal act, he or 

she promptly did all that reasonably could be expected 

to terminate such use of the property. 
A claimant who establishes a lack of knowledge under sub- 
paragraph (A) shall be considered an i nnocent owner unless 
the government, in rebuttal, establishes the existence of 
facts and circumstances that should have created a reason- 
able suspicion that the property was being or would be used 
for an illegal purpose. In that case, the claimant must 
establish that in light of such facts and circumstances, he 
or she did all that reasonably could be expected to prevent 
the use of the property in the commission of any such 
illegal act. 

" (2) With respect to a property interest acquired after 
the act giving rise to the forfeiture took place, a person 
is an innocent owner if he or she establishes, by a prepon- 

20 



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derance of the evidence, that he or she acquired the proper- 
ty as a bona fide purchaser for value who at the time of the 
purchase did not know and was reasonably without cause to 
believe that the property was subject to forfeiture. A 
purchaser is "reasonably without cause to believe that the 
property was subject to forfeiture" if, in light of the 
circumstances, the purchaser did all that reasonably could 
be expected to ensure that he or she was not acquiring 
property that was subject to forfeiture. 

" (3) Notwithstanding any provision of this section, no 
person may assert an ownership interest under this section 
in contraband or other property that it is illegal to 
possess. In addition, except as set forth in paragraph (2), 
no person may assert an ownership interest under this 
section -in the illegal proceeds of— a—cr-iminal act, irrespec- 
tive of state property law. 

"(c) For the purposes of this section -- 
" (1) an "owner" is a person with an ownership interest 
in the specific property sought to be forfeited, including 
but not limited to a lien, mortgage, recorded security 
device or valid assignment of an ownership interest. An 
owner does not include : A) a person with only a general 
unsecured interest in, or claim against, the property or 
estate of another person; (B) a bailee; (C) a nominee who 
exercises no dominion or control over the property; or (D) a 
beneficiary of a constructive trust; and 

21 



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"(2) a person who willfully blinds himself or herself 
to a fact shall be considered to have had knowledge of that 
fact . 

" (d) If the court determines, in accordance with this 
section, that an innocent owner had a partial interest in 
property otherwise subject to forfeiture, or a joint tenancy 
or tenancy by the entirety in such property, the court shall 
enter an appropriate order (1) severing the property; (2) 
transferring the property to the government with a provision 
that the government compensate the innocent owner to the 
extent of his or her ownership interest once a final order 
of forfeiture has been entered and the property has been 
reduced to liquid assets, or (3) permitting the innocent 
owner to retain the property subject to a lien in favor of 
the government to the extent of th«-Jorf eitable interest in 
the property. To effectuate the purposes of this subsec- 
tion, a joint tenancy or tenancy by the entireties shall be 
converted to a tenancy in common by order of the court, 
irrespective of state law. 

" (e) If the person asserting a defense under subsec- 
tions (b) (1) or (b) (2) is a financial institution, as 
defined in section 20 of this title, there shall be a 
presumption, governed by Rule 301 of the Federal Rules of 
Evidence, that the institution acted "reasonably" if the 
institution establishes that it followed rigorous and 
regular internal procedures relating to the approval of any 

22 



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loan or the acquisition of any property interest in accor- 
dance with the standards for due diligence in the lending 
industry. The presumption shall not apply if the government 
establishes that the financial institution had notice that 
the property was subject to forfeiture before it acquired 
any interest in the property. " 

(b) STRIKING SUPERSEDED PROVISIONS.-- (1) Section 981(a) of 
title 18, United States Code, is amended by - - 

(A) striking subsection (a) (2) and renumbering any subsec- 
tions added by this Act accordingly; and 

(B) striking "Except as provided in paragraph (2) , the" and 
inserting "The". 

(2) Sections 511(a)(4), (6) and (7) of the Controlled 
Substances Act (21 U.S.C. § 881(a)(4), (6) and (7)) are amended 
by striking "., except that" and all thaL»-follows, each time it 
appears . 

(3) Sections 2254(a)(2) and (3) of title 18, United States 
Code, are amended by striking ", except that" and all that 
follows, each time it appears. 

(c) CONFORMING AMENDMENT.-- The chapter analysis for chapter 
46 of title 18, United States Code, is amended by inserting the 
following at the appropriate place: 

"983. Innocent owners." 



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SEC. 124. STAY OF CIVIL FORFEITURE CASE 

(a) DRUG FORFEITURES.-- Section 511 (i) of the Controlled 
Substances Act (21 U.S.C. § 881 (i)) is amended to read as fol- 
lows : 

" (i) (1) Upon the motion of the United States, the court 
shall stay the civil forfeiture proceeding if it determines 
that civil discovery or trial could adversely affect the 
government's ability to conduct a related criminal investi- 
gation or the prosecution of a related criminal case. 

"(2) Upon the motion of a claimant, the court shall 
stay the civil forfeiture proceeding with respect to that 
claimant if it determines that the claimant is the subject 
of a related criminal investigation or case, that the claim- 
ant has standing to assert a claim in the civil forfeiture 
proceeding, and that continuation -Qf_t.he forfeiture proceed- 
ing may infringe upon the claimant's right against self- 
incrimination in the related investigation or case. 

"(3) With respect to the impact of civil discovery 
described in paragraphs (1) and (2) , the court may determine 
that a stay is unnecessary if a protective order limiting 
discovery would protect the interest of one party without 
unfairly limiting the ability of the opposing party to 
pursue the civil case. In no case, however, shall the court 
impose a protective order as an alternative to a stay if the 
effect of such protective order would be to allow one party 



24 



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to pursue discovery while the other party was substantially 
unable to do so. 

"(4) For the purposes of this subsection, " •< related 
criminal case" and "a related criminal investigation" mean 
an actual prosecution or investigation in progress at the 
time the request for the stay is made. In determining 
whether a criminal case or investigation is "related" to a 
civil forfeiture proceeding, the court shall consider the 
degree of similarity between the parties, witnesses, facts 
and circumstances involved in the two proceedings without 
requiring an identity with respect to any one or more fac- 
tors . 

" (5) Any presentation to the court under this subsec- 
tion that involves an on-going criminal investigation shall 
be made by the government ex parte and under seal . 

" (6) Whenever a civil forfeiture proceeding is stayed 
pursuant to this subsection, the court shall enter any order 
necessary to preserve the value of the property or to pro- 
tect the rights of lienholders or other persons with an 
interest in the property while the stay is in effect. 

" (7) A determination by the court that the claimant has 
standing to request a stay pursuant to paragraph (2) shall 
apply only to the provisions of this subsection and shall 
not preclude the government from objecting to the claimant's 
standing at the time of trial in accordance with Section 
987(d) of title 18. 

25 



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"(8) A stay imposed pursuant to this subsection shall 
be for a period determined by the court, but for no more 
than 180 days unless the court determines, at the end of 
such time period, that there are compelling reasons why the 
stay should be continued. An order renewing a stay shall be 
reviewed by the court every 90 days unless the parties agree 
that such review is unnecessary." 

(b) IN GENERAL.-- Section 981(g) of title 18, United States 
Code, is amended to read as follows: 

" (g) (1) Upon the motion of the United States, the court 
shall stay the civil forfeiture proceeding if it determines 
that civil discovery or trial could adversely affect the 
government's ability to conduct a related criminal investi- 
gation or the prosecution of a related criminal case. 

" {2> Upon the motion of a claimant, the court shall 
stay the civil forfeiture proceeding with respect to that 
claimant if it determines that the claimant is the subject 
of a related criminal investigation or case, that the claim- 
ant has standing to assert a claim in the civil forfeiture 
proceeding, and that continuation of the forfeiture proceed- 
ing may infringe upon the claimant's right against self- 
incrimination in the related investigation or case. 

" (3) With respect to the impact of civil discovery 
described in paragraphs (1) and (2) , the court may determine 
that a stay is unnecessary if a protective order limiting 
discovery would protect the interest of one party without 

26 



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unfairly limiting the ability of the opposing party to 
pursue the civil case. In no case, however, shall the court 
impose a protective order as an alternative to a stay if the 
effect of such protective order would be to allow one party 
to pursue discovery while the other party was substantially 
unable to do so. 

" (4) For the purposes of this subsection, "a related 
criminal case" and "a related criminal investigation" mean 
an actual prosecution or investigation in progress at the 
time the request for the stay is made. In determining 
whether a criminal case or investigation is "related" to a 
civil forfeiture proceeding, the court shall consider the 
degree of similarity between the parties, witnesses, facts 
and circumstances involved in the two proceedings without 
requiring an identity with respect— fc©-^ny one or more fac- 
tors . 

" (5) Any presentation to the court under this subsec- 
tion that involves an on-going criminal investigation shall 
be made by the government ex parte and under seal . 

" (6) Whenever a civil forfeiture proceeding is stayed 
pursuant to this subsection, the court shall enter any order 
necessary to preserve the value of the property or to pro- 
tect the rights of lienholders or other persons with an 
interest in the property while the stay is in effect. 

" (7) A determination by the court that the claimant has 
standing to request a stay pursuant to paragraph (2) shall 

27 



146 



apply only to the provisions of this subsection ..nd shall 
not preclude the government from objecting to the claimant's 
standing at the time of trial in accordance with Section 
987(d) of this title. 

" (8) An order imposing a stay pursuant to this subsec- 
tion shall expire in 180 days unless the court determines, 
at the end of such time period, that there are compelling 
reasons why the stay should be continued. An order renewing 
a stay shall be reviewed by the court every 90 days unless 
the parties agree that such review is unnecessary." 
(c) GUIDELINES.-- Within 180 days after the effective date 
of this section, the Attorney General and the Secretary of the 
Treasury, respectively, shall promulgate guidelines governing the 
preservation of the value of property subject to forfeiture in a 
case that ha& been stayed pursuant to Saction 511 (i) of the 
Controlled Substances Act (21 U.S.C. § 881 (i)) or Section 981(g) 
of title 18, United States Code. The guidelines shall take into 
account the interests of both the government and the claimant in 
avoiding the depreciation, destruction or dissipation of the 
property pending conclusion of the forfeiture proceeding. 
SEC. 125. APPLICATION OF FORFEITURE PROCEDURES 

(a) IN GENERAL. -- Chapter 46 of title 18, United States 
Code is amended by adding the following section: 
"988. Application of Forfeiture Procedures. 

"(a) Civil Forfeitures. Whenever a statute in this 
title provides for the civil forfeiture of property without 

28 



147 



specifying the procedures governing a judicial forfeiture 
action, the provisions of this chapter relating to civil 
forfeitures shall apply. 

" (b) Criminal Forfeitures. Whenever a statute in this 
title provides for the criminal forfeiture of property 
without specifying the procedures governing such forfei- 
tures, the provisions of this chapter relating to criminal 
forfeitures shall apply." 

(b) CONFORMING AMENDMENT. -- The chapter analysis for 
Chapter 46, of title 18, United States Code, is amended by adding 
the following: 

"988. Application of Forfeiture Procedures." 

Subtitle C - Seizures and Investigations 
SEC. 131. SEIZURE WARRANT REQUIREMENT. 

(a) IN GENERAL.-- Section 981(b) of-title 18, United States 
Code, is amended to read as follows -- 

" (b) (1) Any property subject to forfeiture to the United 
States under this section may be seized by the Attorney General. 
In addition, in the case of property involved in a violation 
investigated by the Secretary of the Treasury or the United 
States Postal Service, the property may also be seized by the 
Secretary of the Treasury or the Postal Service, respectively. 

" (2) Seizures pursuant to this section shall be made pursu- 
ant to a warrant obtained in thfe same manner as provided for a 
search warrant under the Federal Rules of Criminal Procedure, 
except that a seizure may be made without a warrant if it is made 

29 



148 



pursuant to a lawful ai rest or search, or if there is probable 
cause to believe that the property is subject to forfeiture and 
an exception to the Fourth Amendment warrant requirement would 
apply. 

"(3) Notwithstanding the provisions of Rule 41(a), Federal 
Rules of Criminal Procedure, a seizure warrant may be issued 
pursuant to this subsection by a judicial officer in any district 
in which a forfeiture action against the property may be filed 
under section 1355(b) of title 28, United States Code, and 
executed in any district in which the property is found. Any 
motion for the return of property seized under this section shall 
be filed in the district in which the seizure warrant was issued. 

"(4) In the event of a seizure pursuant to paragraph (2) of 
this subsection, proceedings under subsection (d) of this section 
or an applicable criminal forfeiture s tatu te shall be instituted 
as soon as practicable, taking into account the status of any- 
criminal investigation to which the seizure may be related. 

" (5) If any person is arrested or charged in a foreign 
country in connection with an offense that would give rise to the 
forfeiture of property in the United States under this section or 
under the Controlled Substances Act, the Attorney General may 
apply to any federal judge or magistrate judge for an ex parte 
order restraining the property subject to forfeiture for not more 
than 30 days, except that the time may be extended for good cause 
shown. The application for the restraining order shall set forth 
the nature and circumstances of the foreign charges and the basis 

30 



149 



for belief that the person arrested or charged his property in 
the United States that would be subject to forfeiture, and shall 
contain a statement that the restraining order is needed to 
preserve the availability of property for such time as is neces- 
sary to receive evidence from the foreign country or elsewhere in 
support of probable cause for the seizure of the property under 
this subsection. 

" (6) Any owner of property seized pursuant to this section 
may obtain release of the property pending resolution of the 
forfeiture action upon payment of a substitute res in an amount 
equal to the appraised value of the property, unless the seized 
property -- 

(A) is contraband, 

(B) is evidence of a violation of the law, 

(C) by r-eason of design or other ahara.cteristic, is particu- 
larly suited for use in illegal activities, or 

(D) is likely to be used to commit additional criminal acts 
if returned to the owner. 

The substitute res must be in the form of a traveler's check, 
money order, cashier's check or irrevocable letter of credit made 
payable to the seizing agency. If such substitute res is provid- 
ed, the court or in the case of administrative forfeiture, the 
seizing agency, shall have jurisdiction to proceed with the 
forfeiture of the substitute res in lieu of the property. If, at 
the conclusion of the forfeiture proceeding, the property is 
declared forfeited, the owner shall surrender the property and 

31 



150 



recover the substitute res, unless the Attorney General or the j 

seizing agency elects to retain the substitute res in lieu of the i 

property. " j 

(b) DRUG FORFEITURES.-- Section 511(b) of the Controlled .j 

Substances Act (21 U.S.C. § 881(b)) is amended to read as fol- ^ 

lows : i 

" (b) Any property subject to forfeiture to the United States ; 
under this section may be seized by the Attorney General in the 

manner set forth in Section 981(b) of title 18, United States j 

Code . " j 

"(c) CONFORMING AMENDMENT.-- Section 518(d) of the Con- . 

trolled Substances Act (21 U.S.C. § 888(d)) is repealed." , 
SEC. 132. CIVIL INVESTIGATIVE DEMANDS. 

(a) IN GENERAL.-- Chapter 46 of title 18, United States | 
Code, is amended by adding at the end tli£_f ollowing new section: 

"985. Civil Investigative Demands. ' 

" (a) For the purpose of conducting an investigation in j 

contemplation of any civil forfeiture proceeding, the 

Attorney General may -- 

" (A) administer oaths and affirmations; 

1 

" (B) take evidence; and ] 
" (C) by subpoena, summon witnesses and require the 

production of any books, papers, correspondence, memoranda, i 

or other records which the Attorney General deems relevant , 
or material to the inquiry. Such subpoena may require the 

attendance of witnesses and the production of any such i 

32 



151 



records from any place in th .^ United States at any place in 
the United States designated by the Attorney General. 

" (b) Except as provided in this section, the procedures 
and limitations that apply to civil investigative demands in 
subsections (g) , (h) , and (j) of section 1968 of title 18, 
United States Code, shall apply with respect to civil 
investigative demands issued under this subsection. Process 
required by such subsections of section 1968 to be served 
upon "the custodian" shall be served on the Attorney Gener- 
al. Failure to comply with an order of the court to enforce 
such demand shall be punishable as civil or criminal con- 
tempt . 

" (c) In the case of a civil investigative demand for 
which the return date is less than 5 days after the date of 
service, no person shall be found in-ucontempt for failure to 
comply by the return date if such person files a petition 
under subsection (b) not later than 5 days after the date of 
service . 

" (d) A civil investigative demand may be issued pursu- 
ant to this section in furtherance of an investigation 
directed toward the forfeiture of an asset at any time up to 
the filing of a civil forfeiture complaint with respect to 
that asset, except that no demand relating to a given asset 
may be served upon any person who files a claim to that 
asset pursuant to title 19, United States Code, § 1608 once 
such claim is filed. Once a given asset is made the subject 

33 



152 



of a civil forfeiture complaint, all further discovery 
regarding the forfeiture of that asset shall proceed in 
accordance with the Federal Rules of Civil Procedure. 
Investigation relating to the forfeiture of assets not 
subject to a claim or to a forfeiture complaint may proceed 
pursuant to this section at any time. 

"(e) In this section, "Attorney General" means any 
attorney for the government employed by the Department of 
Justice as defined by Rule 54(c) of the Federal Rules of 
Criminal Procedure, and shall not include an attorney, agent 
or other employee of any agency of the Department . " 

(b) CONFORMING AMENDMENT.-- The chapter analysis for chapter 
46 of title 18, United States Code is amended by adding the 
following at the appropriate place: 

"985. Civil investigative HpmanHg " 

(c) OBSTRUCTION OF CIVIL INVESTIGATIVE DEMAND.-- Section 
1505 of title 18, United States Code, is amended by inserting 
"section 985 of this title or". before "the Anti-trust Civil 
Process Act" . 

(d) RIGHT TO FINANCIAL PRIVACY ACT AMENDMENT .- -Section 
1120(b) (1) (A) of the Right to Financial Privacy Act (12 U.S.C. 

§ 3420(b) (1) (A)) is amended by inserting "or civil investigative 
demand" after "a grand jury subpoena". 

(e) FAIR CREDIT REPORTING ACT AMENDMENT .-- Paragraph (1) of 
section 604 of the Fair Credit Reporting Act (15 U.S.C. § 1681b) 



34 



153 



is amended by stri.:ing "or" and inserting ", or a civil investi- 
gative demand" after "grand jury". 
SEC. 133. ACCESS TO RECORDS IN BANK SECRECY JURISDICTIONS 

Section 986 of title 18, United States Code, is amended by 
adding the following new siibsection: 

"Access to records located abroad 

" (d) In any civil forfeiture case, or in any ancillary 
proceeding in any criminal forfeiture case governed by 
Section 1963(1) of this title or Section 413 (n) of the 
Controlled Substances Act (21 U.S.C. § 853 (n) ) , where -- 

" (1) financial records located in a foreign coun- 
try may be material (A) to any claim or to the ability 
of the government to respond to such claim, or (B) in a 
civil forfeiture case, to the government's ability to 
establish the forfeitability -©€— the property; and 

" (2) it is within the capacity of the claimant to 
waive his or her rights under such secrecy laws, or to 
obtain the records him- or herself, so that the records 
can be made available, 
the refusal of the claimant to provide the records in 
response to a discovery request or take the action necessary 
otherwise to make the records available shall result in the 
dismissal of the claim with prejudice. This subsection 
shall not affect the claimant's rights to refuse production 
on the basis of any privilege guaranteed by the Constitution 
or federal laws of the United States . " 

35 



154 



SEC. 134. ACCESS TO OTHER RECORDS. 

Section 6103(i)(l) of the Internal Revenue Code (26 U.S.C. 
§ 6103 (i)(l)) is amended -- 

(1) in subparagraph (A) (i) by inserting "or related 
civil forfeiture" after "enforcement of a specifically 
designated Federal criminal statute"; and 

(2) in subparagraph (B) (iii) by inserting "or civil 
forfeiture investigation or proceeding" after "Federal 
criminal investigation or proceeding" . 

SEC. 135. CXJRRENCY FORFEITURES. 

Section 511 of the Controlled Substances Act (21 U.S.C. 881) ! 

I, 

is amended by inserting the following new subsection: j, 

"Currency Forfeitures 

I 
" (m) At the trial of an action brought pursuant to 

subsection (a) (6) , if the government establishes by a 

preponderance of the evidence that the property subject to 

forfeiture -- 

"(1) is currency or other monetary instruments that 
were found in close proximity to a measurable quantity of 
any controlled substance; or 

"(2) is currency in excess of $10,000 that was being 
transported at an airport or other port of entry, on an 
interstate highway, or on the coastal waters of the United 
States, and the person in possession of the currency dis- 
claims knowledge or ownership of the property, or offers an 

DRAFT -- August 23, 1996 36 



155 



explanation for his or her possession of the currency thrt 

is false, 
there shall be a presumption, governed by Rule 301 of the Federal 
Rules of Evidence, that the currency is the proceeds of a viola- 
tion of the Controlled Substances Act. As provided in Rule 301 
of the Federal Rules of Evidence, the burden of proof shall at 
all times be on the United States to establish that the property 
is subject to forfeiture." 

TITLE II - CRIMINAL FORFEITURES 
SEC. 201. STANDARD OF PROOF FOR CRIMINAL FORFEITURE. 

(a) IN GENERAL.-- Section 982 of title 18, United States 
Code, is amended by adding at the end the following new subsec- 
tion: 

"(c) In any forfeiture action under this section, the 
party bearing the burden of proof sha ll be required to prove 
the matter at issue by a preponderance of the evidence." 

(b) RICO FORFEITURES.-- Section 1963 of title 18, United 

I States Code, is amended by adding at the end the following new 
subsection: 

" (o) In any forfeiture action under this section, the 
party bearing the burden of proof shall be required to prove 
the matter at issue by a preponderance of the evidence." 

(c) DRUG FORFEITURES.-- Section 413 of the Controlled 
Substances Act (21 U.S.C. 853) is amended by adding the following 
new subsection: 

DRAFT -- August 23, 1996 37 



156 



" (r) In any forfeiture action under this section, the 
party bearing the burden of proof shall be required to prove 
the matter at issue by a preponderance of the evidence." 
SEC. 202. NON- ABATEMENT OF FORFEITURE WHEN DEFENDANT DIES PENDING 
APPEAL. 

(a) RICO FORFEITURE.-- Section 1963 of title 18, United 
States Code, is amended by adding at the end thereof the follow- 
ing new subsection: 

" (p) An order of forfeiture under this section shall not 
abate by reason of the death thereafter of any or all of the 
defendants or petitioners or potential petitioners." 

(b) DRUG FORFEITURE.-- Section 413 of the Controlled Sub- 
stances Act (21 U.S.C. 853) is amended by adding at the end 
thereof the following new subsection: 

"Non- abatement of forfei t ure order 
" (q) An order of forfeiture under this section shall not 
abate by reason of the death thereafter of any or all of the 
defendants or petitioners or potential petitioners." 
SEC. 203. REPATRIATION OF PROPERTY PLACED BEYOND THE JURISDICTION 
OF THE COURT 
Section 413 (p) of the Controlled Substances Act (21 U.S.C. 
§ 853 (p) ) and Section 1963 (m) of title 18, United States Code, 
are each amended by inserting the following at the end: 

"In the case of property described in paragraph (3), the 
court may, in addition, order the defendant to return the 
property to the jurisdiction of the court so that it may be 



DRAFT -- August 23, 1996 38 



157 



seized and forfeited. Pursuant to its authority to enter a 
pre-trial restraining order under this section, including 
its authority to restrain any property forfeitable as 
substitute assets, the court may also order the defendant to 
repatriate any property subject to forfeiture pending trial, 
and to deposit that property in the registry of the court, 
or with the United States Marshals Service or the Secretary 
of the Treasury, in an interest -bearing account. Failure to 
comply with an order under this subsection shall be punish- 
able as a civil or criminal contempt of court, and may also 
result in an enhancement of the sentence for th offense 
giving rise to the forfeiture under the obstruction of 
justice provision of Section 3C1.1 of the United States 
Sentencing Guidelines." 
SEC. 204, MOTION AND DISCOVERY PROCEDURES FOR ANCILLARY HEARINGS, 

(a) IN GENERAL.-- Section 1963(1) (4) of title 18, United 
States Code, and Section 413 (n) (4) of the Controlled Substances 
Act (21 U.S.C. § 853 (n) (4)) are each amended by designating the 
present matter as sub-paragraph (A) , and by inserting the follow- 
ing new sub-paragraphs : 

" (B) Before conducting a hearing, the court may enter- 
tain a motion to dismiss the petition for lack of standing, 
for failure to state a claim upon which relief could be 
granted under this section, or for any other ground. For 
the purposes of such motion, all facts set forth in the 
petition shall be assumed to be true. 

DRAFT -- August 23, 1996 39 



35-668 96-6 



158 



(C) If a motion referred to in subparagraph (B) is 
denied, or if no such motion is made, the court may, in its 
discretion, permit the parties to conduct discovery in 
accordance with the Federal Rules of Civil Procedure to the 
extent that the court deteirmines such discovery to be 
necessary or desirable to resolve factual issues before the 
hearing. At the conclusion of such discovery, either party 
may seek to have the court dispose of the petition on a 
motion for summary judgment in the manner described in Rule 
56 of the Federal Rules of Civil Procedure. 

" (D) Any order disposing of a petition pursuant to a 
motion or pursuant to a hearing on the merits of the claim 
shall be appealable in accordance with the Federal Rules of 
Appellate Procedure applicable to civil cases. However, 
where multiple petitions are filed in the same case, an 
order dismissing or granting fewer than all of the petitions 
shall not be appealable until all petitions are resolved, 
unless the court expressly determines that there is no just 
reason for delay and directs the entry of final judgment 
with respect to one or more but fewer than all of the 
petitions. 

" (E) The district court shall retain jurisdiction over 
a petition filed pursuant to this subsection notwithstanding 
any appeal filed by the defendant in the criminal case." 
(b) INTERVENTION BY THE DEFENDANT.-- Section 1963(1) of 
title 18, United States Code, and Section 413 (n) of the Con- 

40 



159 



trolled Substances Act (21 U.S.C 853 (n) ) are each amended by 

adding a new paragraph (8) as follows: 

" (8) If the defendant has filed a timely appeal from a 
conviction under this section and the appeal is pending, any 
person filing a petition under this subsection shall serve a 
copy of the petition upon the defendant, and the defendant 
shall have a right to intervene in the ancillary proceeding 
with respect to the petition in accordance with Rule 24 of 
the Federal Rules of Civil Procedure solely for the purpose 
of contesting the petitioner's alleged interest in the 
property ordered forfeited. The defendant shall have 20 
days from the date of service of the petition to intervene. 
If the defendant does not intervene within such time period, 
he or she shall have waived the right to challenge in any 
forum any adjudication of the petitioner's interest in the 
property pursuant to this subsection, regardless of the 
outcome of the appeal. Whether or not the defendant inter- 
venes in the proceedings pursuant to this subsection, the 
hearing provided for in this subsection shall be limited to 
an adjudication of the validity of the petitioner's legal 
right, title or interest in the property ordered forfeited, 
and shall not provide a forum to re-litigate the forfeita- 
bility of the property." 

(c) IN PERSONAM JUDGMENTS.-- Section 1963 (1) (1) of title 18, 
United States Code, and Section 413 (n) (1) of the Controlled Sub- 



41 



160 



stances Act (21 U.S.C. 853{n)(l)) are each amended by adding 
the following sentence at the end: 

"To the extent that the order of forfeiture includes only an 
in personam money judgment against the defendant, no proceeding 
under this subsection shall be necessary." 
SEC. 205. PRE-TRIAL RESTRAINT OF SUBSTITDTE ASSETS. 

(a) IN GENERAL. -- Section 413(e)(1) of the Controlled 
Substances Act (21 U.S.C. 853(e)(1)) is amended by striking 
" (a) " and inserting " (a) or (p) " . 

(b) RICO. -- Section 1963(d)(1) of title 18, United States 
Code, is amended by striking "(a)" and inserting "(a) or (m) " . 
SEC. 206. DEFENSES APPLICABLE TO ANCILLARY PROCEEDINGS IN CRIMI- 
NAL FORFEITURE CASES. 

(a) IN GENERAL.-- Section 413(n)(6) of the Controlled 
Substances Act (21 U.S.C. 853 (n) (6)) i-s-araended by striking 
subparagraphs (A) and (B) and the dash that precedes them, and 
inserting "the petitioner is an innocent owner of the property as 
defined in section 983 of title 18, United States Code,". 

(b) RICO.-- Section 1963(1) of title 18, United States Code, 
is amended by striking subparagraphs (A) and (B) and inserting 
"the petitioner is an innocent owner of the property as defined 
in section 983 of this title,". 

SEC. 207. UNIFORM PROCEDURES FOR CRIMINAL FORFEITURE 

Section 982(b)(1) of title 18, United States Code, is 
amended to read as follows: 



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" (b) (1) The forfeiture of property under this section, 
including any seizure and disposition of the property and any 
related administrative or judicial proceeding, shall be governed 
by the provisions of section 413 of the Comprehensive Drug Abuse 
Prevention and Control Act of 1970 (21 U.S.C 853), except for 
subsection 413 (d) which shall not apply to forfeitures under this 
section. " 
SEC. 208. CRIMINAL SEIZURE WARRANTS 

(a) IN GENERAL.-- Section 513(f) of the Controlled Substanc- 
es Act (21 U.S.C. 853(f)) is amended to read as follows: 

" (f ) Property subject to forfeiture under this section 
may be seized pursuant to Section 981(b) of title 18, United 
States Code . " 

(b) RICO.-- Section 1963 of title 18, United States Code, is 
amended by adding the following new subeeetion: 

" (n) Property subject to forfeiture under this section 
may be seized pursuant to Section 981(b) of this title." 
SEC. 209. FORFEITABLE PROPERTY TRANSFERRED TO THIRD PARTIES. 

Sections 1963(c) of title 18, United States Code, and 
section 413(c) of the Controlled Substances Act (21 U.S.C. 

853 (c) ) are each amended by designating the present matter as 
paragraph (1) and adding the following new paragraph: 

" (2) If, as provided in paragraph (1) , property trans- 
ferred to a transferee is ordered forfeited and the trans- 
feree fails to establish that he is a bona fide purchaser, 
but the transferee is unable, due to the transferee's act or 

43 



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omission, to turn the property over to the United States, 
the transferee shall owe the United States a sum of money up 
to the value of the property transferred by the defendant, 
plus interest from the time of the transfer. Once the 
ancillary proceedings regarding the transferee's claim to be 
a bona fide purchaser are concluded, the district court that 
issued the order of forfeiture shall issue a judgment in 
favor of the United States and against the transferree for 
the amount of money to which the United States is entitled." 
SEC. 210. RIGHT OF THIRD PARTIES TO CONTEST FORFEITURE OF SUBSTI- 
TUTE ASSETS 

(a) IN GENERAL.-- Section 413(c) of the Controlled Substanc- 
es Act (21 U.S.C. 853(c)), as amended by this Act, is further 
amended by -- 

(1) inserting the following after -tie first sentence: 
"All right, title and interest in property described in 

subsection (p) of this section vests in the United States at the 
time an indictment, information or bill of particulars describing 
the property as substitute assets is filed."; and 

(2) by striking "Any such property that is subsequently 
transferred to a person other than the defendant" and inserting 
"Any property that is transferred to a person other than the 
defendant after the United States' interest in the property has 
vested pursuant to this subsection" . 

(b) RICO.-- Section 1963(c) of title 18, United States Code, 
as amended by this Act, is further amended by -- 

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(1) inserting the following after the first sentence: 
"All right, title and interest in property described in 

subsection (m) of this section vests in the United States at the 
time an indictment, information or bill of particulars describing 
the property as substitute assets is filed."; and 

(2) by striking "Any such property that is subsequently 
transferred to a person other than the defendant" and inserting 
"Any property that is transferred to a person other than the 
defendant after the United States' interest in the property has 
vested pursuant to this subsection" . 

(c) CONFORMING AMENDMENTS.-- Section 1963(1) (6) of title 18, 
United States Code, and section 413 (n) (6) of the Controlled 
Substances Act (21 U.S.C. 853 (n) (6)) are each amended by adding 
at the end the following sentence: 

"In the -ease of substitute assets, — fche petitioner must show 
that his interest in the property existed at the time the proper- 
ty vested in the United States pursuant to subsection (c) , or 
that he subsequently acquired his interest in the property as a 
bona fide purchaser for value as provided in this subsection." 
SEC. 211. HEARINGS ON PRE-TRIAL RESTRAINING ORDERS; ASSETS NEEDED 
TO PAY ATTORNEY'S FEES. 

(a) RESTRAINING ORDERS.-- Section 413(e) of the Controlled 
Substances Act (21 U.S.C. 853(e)) is amended -- 

(1) in paragraph (3) , by adding the following after the 
period: "The court shall issue any protective order necessary to 
prevent the premature disclosure of any ongoing law enforcement 

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operation or investigation or the identity of any witness at the 
hearing. In addition, in any case involving an ongoing investi- 
gation, the court shall permit the presentation of evidence in 
camera or under seal. Rule 65, Federal Rules of Civil Procedure, 
shall not apply to restraining orders issued under this subsec- 
tion. " ; and 

(2) by adding the following new paragraph: 

"(4) (A) When property is restrained pre-trial subject 
to paragraph (1) (A) , the court may, at the request of the 
defendant, hold a pre-trial hearing to determine whether the 
restraining order should be vacated or modified with respect 
to some or all of the restrained property because -- 

" (i) it restrains property that would not be subject to 
forfeiture even if all of the facts set forth in the indict- 
ment were established as true; ^ 

" (ii) it causes a substantial hardship to the moving 
party and less intrusive means exist to preserve the subject 
property for forfeiture; or 

" (iii) the defendant establishes that he or she has no 
assets, other than the restrained property, available to 
exercise his or her constitutional right to retain counsel, 
and there is no probable cause to believe that the re- 
strained property is subject to forfeiture. 

" (B) If the defendant files a motion under subparagraph 
(A) (iii) , the court shall require the defendant to establish 
that he has no access to other assets adequate for the 

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payment of criminal defense counsel before conducting any 
probable cause inquiry. The government shall have an oppor- 
tunity to cross-examine the defendant and any witnesses he 
or she may present on this issue. If the court determines 
that the defendant has established that he has no access to 
other assets, it shall hold a hearing to determine whether 
there is probable cause for the forfeiture of the defen- 
dant's property. If the court determines that no probable 
cause exists for the forfeiture of an asset, it shall modify 
the restraining order to the extent necessary to permit the 
defendant to use that asset to retain counsel. 

" (C) In any hearing under this paragraph where probable 
cause is at issue, the court shall limit its inquiry to the 
existence of probable cause for the forfeiture, and shall 
neither entertain challenges to the_JSfalidity of the indict- 
ment, nor require the government to produce additional evi- 
dence regarding the facts of the case to support the grand 
jury's finding of probable cause regarding the criminal 
offense giving rise to the forfeiture. In all cases, the 
party requesting the modification of the restraining order 
shall bear the burden of proof. 

" (D) A person other than the defendant who has a legal 
interest in the restrained property may move to modify or 
vacate the restraining order for the reasons stated in 
subparagraph (A) (ii) . In accordance with subsection (k) , 
however, such person may not object to a restraining order 

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on grounds that may be asserted only in the ancillary 
hearing pursuant to subsection (n) . 

" (E) If the property is restrained is subject to 
forfeiture as substitute assets, the court may exempt from 
the restraining order assets needed to pay attorneys fees, 
other necessary cost of living expenses, and expenses of 
maintaining the restrained assets" . 

(b) RICO.-- Section 1963(d) of title 18, United States Code, 
is amended -- 

(1) in paragraph (3), by adding the following after the 
period: "The court shall issue any protective order necessary to 
prevent the premature disclosure of any ongoing law enforcement 
operation or investigation or the identity of any witness at the 
hearing. In addition, in any case involving an ongoing investi- 
gation, the court shall permit the presentation of evidence in 
camera or under seal. Rule 65, Federal Rules of Civil Procedure, 
shall not apply to restraining orders issued under this subsec- 
tion. " ; and 

(2) by adding the following new paragraph: 

"(4) (A) When property is restrained pre-trial subject 
to paragraph (1) (A) , the court may, at the request of the 
defendant, hold a pre-trial hearing to determine whether the 
restraining order should be vacated or modified with respect 
to some or all of the restrained property because -- 



48 



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" (i) it restrains property that would not be subject to 
forfeiture even if all of the facts set forth in the indict- 
ment were established as true; 

" (ii) it causes a substantial hardship to the moving 
party and less intrusive means exist to preserve the subject 
property for forfeiture; or 

"(iii) the defendant establishes that he or she has no 
assets, other than the restrained property, available to 
exercise his or her constitutional right to retain counsel, 
and there is no probable cause to believe that the re- 
strained property is subject to forfeiture. 

" (B) If the defendant files a motion under subparagraph 
(A) (iii) , the court shall require the defendant to establish 
that he has no access to other assets adequate for the 
payment of criminal defense counsei— fee^fore conducting any 
probable cause inquiry. The government shall have an oppor- 
tunity to cross-examine the defendant and any witnesses he 
or she may present on this issue. If the court determines 
that the defendant has established that he has no access to 
other assets, it shall hold a hearing to determine whether 
there is probable cause for the forfeiture of the defen- 
dant's property. If the court determines that no probable 
cause exists for the forfeiture of an asset, it shall modify 
the restraining order to the extent necessary to permit the 
defendant to use that asset to retain counsel. 



49 



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" {C^ In any hearing under this paragraph where probable 
cause is at issue, the court shall limit its inquiry to the 
existence of probable cause for the forfeiture, and shall 
neither entertain challenges to the validity of the indict- 
ment, nor require the government to produce additional evi- 
dence regarding the facts of the case to support the grand 
jury's finding of probable cause regarding the criminal 
offense giving rise to the forfeiture. In all cases, the 
party requesting the modification of the restraining order 
shall bear the burden of proof. 

" (D) A person other than the defendant who has a legal 
interest in the restrained property may move to modify or 
vacate the restraining order for the reasons stated in 
subparagraph (A) (ii) . In accordance with subsection (i) , 
however, -such person may not objeofe— feo a restraining order 
on grounds that may be asserted only in the ancillary 
hearing pursuant to subsection (1) . 

" (E) If the property is restrained is subject to 
forfeiture as substitute assets, the court may exempt from 
the restraining order assets needed to pay attorneys fees, 
other necessary cost of living expenses, and expenses of 
maintaining the restrained assets". 

(c) CONFORMING AMENDMENT.-- Section 1345(b) of title 18, 
United States Code, is amended by striking the last sentence and 
inserting the following: "In preparation for such hearing, the 
court may authorize the parties to conduct discovery pursuant to 

50 



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Rule 16, FederaJ Rules of Criminal Procedure; however, where a 
restraining order or injunction is sought pre- indictment , the 
court shall issue any protective order necessary to prevent the 
premature disclosure of any ongoing law enforcement operation or 
investigation or the identity of any witness. In addition, in 
any case involving an ongoing investigation, the court shall 
permit the presentation of evidence in camera or under seal . 
Rule 65, Federal Rules of Civil Procedure, shall not apply to re- 
straining orders issued under this subsection." 
SEC. 212. AVAILABILITY OF CRIMINAL FORFEITORE 

Section 2461 of title 28, United States Code, is amended by 
adding the following subsection: 

" (c) Whenever a forfeiture of property is authorized in 
connection with a violation of an Act of Congress, and any 
person Ls charged in an indictment_j3r .information with such 
violation but no specific statutory provision is made for 
criminal forfeiture upon conviction, the government may 
include the forfeiture in the indictment or information in 
accordance with Rule 7 of the Federal Rules of Criminal 
Procedure, and upon conviction, the court shall order the 
forfeiture of the property in accordance with the procedures 
set forth in section 982 of title 18, United States Code." 
SEC. 213. APPEALS IN CRIMINAL FORFEITURE CASES. 

(a) PRE-TRIAL DISMISSAL OF FORFEITURE COUNT.-- Section 3731 
of title 18, United States Code, is amended in the first unnum- 
bered paragraph by inserting ", or dismissing a forfeiture count 

51 



170 



in whole or in part," after "order of a crstrict court dismissing 
an indictment or information" . 

(b) REVIEW OF A SENTENCE.-- Section 3742 of title 18, United 
States Code, is amended by inserting the following new subsec- 
tion: 

" (i) Forfeiture orders.-- The government may file 
a notice of appeal in the district court of any deci- 
sion, judgment, or order of a district court denying a 
forfeiture in whole or in part, or mitigating a forfei- 
ture for constitutional reasons, except that no appeal 
shall lie where the double jeopardy clause of the 
United States Constitution prohibits further prosecu- 
tion. 
SEC. 214. DISCOVERY PROCEDURE FOR LOCATING FORFEITED ASSETS. 

Section 1963 (k> of title 18, Unite«h-St-ates Code, and Section 
413 (m) of the Controlled Substances Act (21 U.S.C. 853 (m) ) are 
each amended by -- 

(1) adding the following at the end before the period: 
"to the extent that the provisions of the Rule are consis- 
tent with the purposes for which discovery is conducted under 
this subsection" ; and 

2) adding the following additional sentence: 
"Because this subsection applies only to matters occurring 
after the defendant has been convicted and his property has been 
declared forfeited, the provisions of Rule 15 requiring the 



52 



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consent of the defendant and the presence of the defendant at the 

deposition shall not apply." 

SEC. 215. SCOPE OF CRIMINAL FORFEITURE 

Section 413 of the Controlled Substances Act (21 U.S.C. 
853) is amended by adding the following new subsection: 

" (t) To avoid the necessity of filing parallel civil forfei- 
ture proceedings to adjudicate the interests of third parties who 
do not qualify as innocent owners of property subject to forfei- 
ture under this section, the interests of third parties may be 
forfeited under this section, provided that the defendant has at 
least a partial interest in the forfeited property and the 
defendant's interest is forfeited. To adjudicate the third 
party's interest, the ancillary proceeding described in subsec- 
tion (n) shall be an in rem proceeding in which the third party 
shall first have the burden of establisiiing standing pursuant to 
subsection (n) (2) , after which the government shall have the 
burden of establishing the f orf eitability of the third party's 
interest, and the third party shall have the burden of establish- 
ing an innocent owner defense under subsection (n) (6)." 

TITLE III -- PROPERTY SUBJECT TO FORFEITURE 
SEC. 301. FORFEITURE OF PROCEEDS OF FEDERAL OFFENSES. 

(a) FINDINGS. Congress finds that -- 

Whereas, no person who commits a criminal offense has any 
right to retain the proceeds of that offense; and 

Whereas, the forfeiture of the proceeds of a criminal 
offense deprives a criminal of the benefits of the crime and puts 

53 



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the criminal in the position he or she was in before the commis- 
sion of the offense, and 

Whereas, the forfeiture of criminal proceeds deprives the 
criminal of property that could be used to commit additional 
criminal offenses, and 

Whereas, the forfeiture of criminal proceeds may facilitate 
the restoration of property to the victims of crime, and 

Whereas, forfeiture of criminal proceeds can offset law 
enforcement expenses. 

The forfeiture of. criminal proceeds shall be considered 
remedial and not punitive in nature. 

(b) CIVIL FORFEITURE.-- Section 981(a)(1) of title 18, 
United States Code, is amended -- 

(1) in sub-paragraph (C) by strilcing "of section 215" and 
all that- follows up to the period -and inserting "of any 
offense in this title or a conspiracy to commit such of- 
fense"; and 

(2) by striking sub -paragraphs (D) , (E) and (F) . 

(c) CRIMINAL FORFEITURE.-- Section 982(a) of title 18, 
United States Code, is amended -- 

(1) in paragraph (2), by stri)cing "violate --" and subpara- 
graphs (A) and (B) and inserting "violate any offense in 
this title, "; and 

(2) by striking paragraphs (3) , (4) and (5) . 
SEC. 302. UNIFORM DEFINITION OF "PROCEEDS" 



54 



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(a) CIVIL FORFEITURE.-- Section 981(a) of title 18, United 
States Code, is amended -- 

(1) in paragraph (1) , by striking "gross receipts" and 
"gross proceeds" wherever those terms appear and inserting "pro- 
ceeds " ; and 

(2) by adding a new paragraph (3) as follows: 

"(3) In this section, "proceeds" means any and all 
property of any kind obtained, directly or indirectly, at 
any time as the result of the commission of the offense 
giving rise to forfeiture, and any property traceable 
thereto. "Proceeds" is not limited to the net gain or 
profit realized from the commission of the offense." 

(b) CRIMINAL FORFEITURE.-- Section 982 of title 18, United 
States Code, is amended -- 

(1) in subsection (a) , by striking— ii^ross receipts" and 
"gross proceeds" wherever those terms appear and inserting "pro- 
ceeds" ; and 

(2) by adding the following new paragraph to subsection (b) : 

" (3) In this section, "proceeds" means any and all 
property of any kind obtained, directly or indirectly, at 
any time as the result of the commission of the offense 
giving rise to forfeiture, and any property traceable 
thereto. Where the offense involves as an element a scheme, 
a conspiracy, or a pattern of criminal activity, "proceeds" 
includes any and all property obtained from the entire 
course of conduct constituting such scheme, conspiracy or 

55 



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pattern. "Proceeds" is not limi .:ed to the net gain or 
profit realized from the commission of the offense." 
(c) CONTROLLED SUBSTANCES.-- (1) Section 511 of the Con- 
trolled Substances Act (21 U.S.C. 881) is amended by adding the 
following new subsection: 

" (k) In this section, "proceeds" means any and all 
property of any kind obtained, directly or indirectly, at 
any time as the result of the commission of the offense 
giving rise to forfeiture, and any property traceable 
thereto. "Proceeds" is not limited to the net gain or 
profit realized from the commission of the offense." 

(2) Section 413 of the Controlled Substances Act (21 
U.S.C. 853) is amended by adding the following new subsec- 
tion: 

"Definition of proceeds. ^~ 

" (s) In this section, "proceeds" means any and all 
property of any kind obtained at any time, directly or 
indirectly, as the result of the commission of the offense 
giving rise to forfeiture, and any property traceable 
thereto. Where the offense involves as an element a scheme, 
a conspiracy, or a pattern of criminal activity, "proceeds" 
includes any and all property obtained from the entire 
course of conduct constituting such scheme, conspiracy or 
pattern. "Proceeds" is not limited to the net gain or 
profit realized from the commission of the offense." 



56 



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(d) RICO.-- Subsection 1963(a) of title 18, United Sates 
Code, is amended by adding the following at the end: 

"In this section, "proceeds" means any and all property 
obtained from the entire pattern of racketeering activity or 
unlawful debt collection and is not limited to net profits." 
SEC. 303. FORFEITURE OF FIREARMS USED IN CRIMES OF VIOLENCE AND 
FELONIES 

(a) CIVIL FORFEITURE. --Section 981(a)(1) of title 18, United 
States Code, is amended by inserting after subparagraph (C) the 
following : 

"(D) Any firearm (as defined in Section 921(a) (3) of 
this title) used or intended to be used to commit or to 
facilitate the commission of any crime of violence (as 
defined in Section 16 of this title) or any felony under ^ 
federal law." 

(b) CRIMINAL FORFEITURE.-- (1) Section 982(a) of title 18, 
United States Code, is amended by inserting after subparagraph 

(2) the following: 

"(3) The court, in imposing a sentence on a person 
convicted of any crime of violence (as defined in Section 16 
of this title) or any felony under federal law, shall order 
that the person forfeit to the United States any firearm (as 
defined in Section 921(a) (3) of this title) used or intended 
to be used to commit or to facilitate the commission of the 
offense. " 



57 



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(2) Section 3665 jf title 18, United States Code, is amended 
by adding the following new paragraph at the end: 

"For the purposes of this section, the procedures 
governing the forfeiture of a firearm under section 
982(a)(3) of this title shall apply." 

(c) DISPOSAL OF FORFEITED PROPERTY. - -Section 981(c) of title 
18, United States Code, is amended by adding at the end the 
following sentence: 

"Any firearm forfeited pursuant to subsection (a) (1) (D) or 
section 982(a) (3) of this title shall be disposed of by the 
seizing agency in accordance with law." 

(d) AUTHORITY TO FORFEIT PROPERTY UNDER SECTION 924(d) .-- 
Section 924(d) of title 18, United States Code, is amended by 
adding the following new paragraph: 

" (4-) Whenever any firearm is -subject to forfeiture 
under this section because it was involved in or used in a 
violation of subsection (c) , the Secretary of the Treasury 
shall have the authority to seize and forfeit, in accordance 
with the procedures of the applicable forfeiture statute, 
any property otherwise forfeitable under the laws of the 
United States that was involved in or derived from the crime 

_ of violence or drug trafficking crime described in subsec- 
tion (c) in which the forfeited firearm was used or car- 
ried. " 

SEC. 304. FORFEITURE OF PROCEEDS TRACEABLE TO FACILITATING PROP- 
ERTY IN DRUG CASES. 

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(a) CONVEYANCES.-- Section 511(a)(4) .■>£ the Controlled 
Substances Act (21 U.S.C. 881(a)(4)) is amended-- 

(1) by inserting ", and any property traceable to such 
conveyances" after "property described in paragraph (1), (2), or 

(9)"; 

(2) in subparagraph (A) by inserting ", and no property 
traceable to such conveyance," before "shall be forfeited"; and 

(3) in subparagraphs (B) and (C) by inserting "and no 
property traceable to such conveyance" before "shall be for- 
feited" . 

(b) REAL PROPERTY.-- Section 511(a)(7) of the Controlled 
Substances Act (21 U.S.C. 881(a) (7)) is amended by inserting 

", and any property traceable to such property" after "one year's 
imprisonment" . 

(c) NEGOTIABLE INSTRUMENTS AND SECUBITIES . --Section 
511(a) (6) of the Controlled Substances Act (21 U.S.C. 881(a) (6)) 
is amended by inserting ", and any property traceable to such 
property" after "this subchapter" the second time it appears. 
SEC. 305. FORFEITURE FOR ALIEN SMUGGLING. 

(a) CIVIL FORFEITURE.-- Section 274(b) of the Immigration 
and Nationality Act of 1952 (8 U.S.C. 1324(b)) is amended - 

(1) by amending paragraphs (1) and (2) to read as follows: 

" (b) SEIZURE AND FORFEITURE. (1) The following proper- 
ty shall be subject to seizure and forfeiture: 



59 



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"(A) any conveyance, including any vessel, vehicle, or 
aircraft, which has been or is being used in the commission 
of a violation of subsection (a) ; and 

"(B) any property, real or personal, (i) that consti- 
tutes, or is derived from or is traceable to the proceeds 
obtained directly or indirectly from the commission of a 
violation of subsection (a) , or (ii) that is used to facili- 
tate, or is intended to be used to facilitate, the commis- 
sion of a violation of subparagraph (a) (1) (A) . 

"(2) Any property subject to forfeiture to the United 
States under this section may be seized by the Attorney 
General in the manner set forth in Section 981(b) of title 
18,, United States Code."; and 

(2) in paragraphs (4) and (5) by striking "a convey- 
ance" and "conveyance" each place the phrase or word appears 
and inserting "property" . 
(b) CRIMINAL FORFEITURE.-- Section 274 of the Immigration 

and Nationality Act of 1952 (8 U.S.C. 1324) is further amended by 

redesignating subsection (c) to be subsection (d) and inserting 

the following new subsection (c) -- 
" (c) Criminal forfeiture 
" (1) Any person convicted of a violation of subsection (a) 

shall forfeit to the United States, irrespective of any provision 

of State law -- 



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"(A) any conveyance, including any vessel, vehicle, or 
aircraft used in the commission of a violation of subsection 
(a) ; and 

" (B) any property real or personal, (i) that con- 
stitutes, or is derived from or is traceable to the proceeds 
obtained directly or indirectly from the commission of a 
violation of subsection (a) , or (ii) that is used to facili- 
tate, or is intended to be used to facilitate, the commis- 
sion of a violation of subparagraph (a) (1) (A) . 
"The court, in imposing sentence on such person, shall order that 
the person forfeit to the United States all property described in 
this subsection. 

" (2) The criminal forfeiture of property under this subsec- 
tion, including any seizure and disposition of the property and 
any related administrative or judicial pro ceeding, shall be gov- 
erned by the provisions of section 413 of the Comprehensive Drug 
Abuse Prevention and Control Act of 1970 (21 U.S.C. 853), 
except for subsection 413 (d) which shall not apply to forfeitures 
vinder this subsection." 
SEC. 306. FORFEITURE OF PROCEEDS OF CERTAIN FOREIGN CRIMES. 

Section 981(a) (1) (B) of title 18, United States Code, is 
amended by -- 

(1) inserting " (i) " after "against a foreign nation involv- 
ing " ; and 

(2) inserting " (ii) murder, kidnapping, robbery, or extor- 
tion, (iii) fraud, or any scheme or attempt to defraud, by or 

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against a foreign bank (as defined in paragraph 7 of section 1(b) 
of the International Banking Act (12 U.S.C. 3101(7))); or (iv) 
money laundering, tax evasion, public corruption, smuggling, 
entry of goods falsely classified, entry of goods by means of 
false statements, or export control violations" after "Controlled 
Substances Act) " . 

SEC. 307. FORFEITURE OF PROPERTY USED TO FACILITATE FOREIGN DRUG 
CRIMES . 
Section 981(a)(1)(B) of title 18, United States Code, is 
amended by inserting ", ot any property used to facilitate an 
offense described in subparagraph (i) " at the end before the 
period. 
SEC. 308. FORFEITURE FOR VIOLATIONS OF SECTION 60501 AND 1960 

(a) Sections 981(a)(1)(A) and 982(a)(1) of title 18, United 
States Code, are amended by inserting " , or of section 60501 of 
the Internal Revenue Code of 1986 (26 U.S.C. 60501)" after "of 
title 31". 

(b) Section 981(a)(1)(A) of title 18, United States Code, is 
amended by striking "or 1957" and inserting ", 1957 or 1960". 
SEC. 3 09. CRIMINAL FORFEITURE FOR MONEY LAUNDERING CONSPIRACIES 

Section 982(a)(1) of title 18, United States Code, is amend- 
ed by inserting ", or a conspiracy to commit any such offense" 
after "of this title". 

SEC. 310. SEIZURE OF VEHICLES WITH CONCEALED COMPARTMENTS USED 
FOR SMUGGLING. 



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(a) IN CZNERAL.-- Section 3 of the Ant i- Smuggling Act of 
1935 (19 U.S.C. 1703) is amended -- 

(1) by amending the title of such section to read as fol- 
lows : 

"Sec. 1703. Seizure and forfeiture vessels, vehicles 
and other conveyances"; 

(2) by amending the title of subsection (a) to read as 
follows : 

" (a) Vessels, vehicles and other conveyances subject to 
seizure and forfeiture"; 

(3) by amending the title of subsection (b) to read as 
follows : 

"(b) Vessels, vehicles and other conveyances defined"; 

(4) by inserting ", vehicle and other conveyance" after the 
word "vessel" ..everywhere it appears in the text of subsec- 
tions (a) and (b) ; and 

(5) by amending subsection (c) to read as follows: 

"(c) Acts constituting prima facie evidence of vessel, 
vehicle or other conveyance engaged in smuggling 

"For the purposes of this section, prima facie 
evidence that a conveyance is being, or has been, or is 
attempted to be employed in smuggling or to defraud the 
revenue of the United States shall be -- 

" (1) in the case of a vessel, the fact that a 
vessel has become subject to pursuit as provided in 
section 1581 of this title, or is a hovering vessel, or 

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that a vessel fails, at any place within the customs 
waters of the United States or with a customs-enforce- 
ment area, to display lights as required by law. 

"(2) in the case of a vehicle or other conveyance, I 
the fact that a vehicle or other conveyance has any 
compartment or equipment that is built or fitted out 
for smuggling.", 
(b) CONFORMING AMENDMENT.-- The table of sections for 
Chapter 5 of title 19, United States Code, is amended by striking 
the items relating to section 1703 and inserting in lieu thereof 
the following: 

"1703. Seizure and forfeiture of vessels, vehicles and 
other conveyances . 

" (a) Vessels, vehicles and other conveyances 
subject to seizure and forfeiture. 

" (b) 'Vessels, vehicles and other convey- 
ances' defined. 

" (c) Acts constituting prima facie evidence 
of vessel, vehicle or other conveyance engaged in 
smuggling. " . 
SEC. 311. FORFEITURE OF INSTRUMENTALITIES OF TERRORISM, TELEMAR- 
KETING FRAUD, AND OTHER OFFENSES. 
(a) CIVIL FORFEITURE. --Section 981(a)(1) of title 18, United 
States Code, is amended by adding the following sub - paragraphs : 

"(E) (i) Any computer, photostatic reproduction machine, 
electronic communications device or other material, article, 

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apparatus, device or thing made, possessed, fitted, ' sed or 
intended to be used on a continuing basis to commit a 
violation of sections 513, 1028 through 1032, and 1341, 1343 
and 1344 of this title, or a conspiracy to commit such 
offense, and any property traceable to such property. 

" (ii) Any conveyance used on two or more occasions to 
transport the instrumentalities used in the commission of a 
violation of sections 1028 and 1029 of this title, or a 
conspiracy to commit such offense, and any property trace- 
able to such conveyance . 

"(F) Any conveyance, chemicals, laboratory equipment, 
or other material, article, apparatus, device or thing made, 
possessed, fitted, used or intended to be used to commit an 
offense punishable under Chapter 113B of this title (relat- 
ing to terrorism) , or a violation of the Explosives Control 
Act, 18 U.S.C. 841-48, or the National Firearms Act (26 
U.S.C. Chapter 53), or a conspiracy to commit any such 
offense, and any property traceable to such property." 
(b) CRIMINAL FORFEITURE. --Section 982(a) of title 18, United 
States Code, is amended by inserting the following new paragraph: 

"(4) (A) The court, in imposing a sentence on a person 
convicted of a violation of sections 513, 1028 through 1032, 
and 1341, 1343 and 1344 of this title, or a conspiracy to 
commit such offense, shall order the person to forfeit to 
the United States any computer, photostatic reproduction ma- 
chine, electronic communications device or other material, 

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article, apparatus, device or thing made, possessed, fitted, 
used or intended to be used to commit such offense, and any 
property traceable to such property. 

" (B) The court, in imposing a sentence on a person 
convicted of a violation of sections 1028 or 1029 of this 
title, or a conspiracy to commit such offense, shall order 
the person to forfeit to the United States any conveyance 
used on two or more occasions to transport the instrumental- 
ities used to commit such offense, and any property trace- 
able to such conveyance. 

"(5) The court, in imposing a sentence on a person 
convicted of an offense punishable under Chapter 113B of 
this title (relating to terrorism) , or a violation of the 
Explosives Control Act, 18 U.S.C. 841-48, or the National 
Firearms Act (26 U.S.C. Chapter 5 3) , or a conspiracy to 
commit any such offense, shall order the person to forfeit 
to the United States any conveyance, chemicals, laboratory 
equipment, or other material, article, apparatus, device or 
thing made, possessed, fitted, used or intended to be used 
to commit such offense, and any property traceable to such 
property. " 

SEC. 312. FORFEITURE OF VEHICLES USED FOR GUN RUNNING 

(a) CIVIL FORFEITURE. --Section 981(a)(1) of title 18, United 

States Code, is amended by adding the following sub-paragraph: 



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"(G) (i) Any conveyance used or ir^ended to be used to 
commit a gun running offense, or conspiracy to commit such 
offense, and any property traceable to such property. 

(ii) For the purposes of this section, a gun running 
offense is a violation of any of the following sections of 
this title involving five or more firearms: section 
922(a) (1) (A) (engaging in a firearms business without a 
license); section 922(a) (3) (transporting a firearm across 
state lines); section 922(a)(5) (transferring a firearm to a 
non-licensed person in another state); section 922(a)(6) 
(making false statements in connection with the purchase of 
a firearm); section 922 (j) (receiving stolen firearms); 
section 922 (k) (receiving a firearm with obliterated serial 
numbers); and section 922 (u) (stealing firearms from federal 

firearms- licensees) . — - 

(b) CRIMINAL FORFEITURE. --Section 982(a) of title 18, United 
States Code, is amended by inserting the following new paragraph: 
"(6) The court, in imposing a sentence on a person 
convicted of a gun running offense, as defined in Section 
981(a) (1) (G) , or a conspiracy to commit such offense, shall 
order the person to forfeit to the United States any convey- 
ance used or intended to be used to commit such offense, and 
any property traceable to such conveyance." 



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SEC. 3^3. FORFEITURE OF CRIMINAL PROCEEDS TRANSPORTED IN INTER- 
STATE COMMERCE 
Section 1952 of title 18, United States Code, is amended by 

adding the following subsection: 

" (d) (1) Any property involved in a violation of subsec- 
tion (a) (1) or a conspiracy to commit such violation, or any 
property traceable to such property, is subject to forfei- 
ture to the United States in accordance with the procedures 
set forth in section 981 of this title. 

" (2) The court, in imposing sentence on a person con- 
victed of an offense in violation of subsection (a) (1) or a 
conspiracy to commit such offense, shall order that the 
person forfeit to the United States any property involved in 
such offense, or any property traceable to such property, in 
accordance with the procedures set — forth in section 982 of 
this title." 

SEC. 314. FORFEITURES OF PROCEEDS OF FEDERAL FOOD, DRUG, AND 
COSMETIC ACT VIOLATIONS 
Chapter 9 of title 21, United States Code, is amended by 

adding the following two new sections: -- 

"Sec. 311. CIVIL FORFEITURE OF PROCEEDS OF FEDERAL FOOD, 
DRUG, AND COSMETIC ACT VIOLATIONS 

"(a) Any property, real or personal, that constitutes, 

or is derived from or is traceable to the proceeds obtained 

directly or indirectly from a criminal violation of, or a 

conspiracy to commit a criminal violation of, a provision of 

the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301- 

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1395) shall be subject to judicial forfeiture to the United 
States. 

"(b) The provisions of chapter 46 of title 18, United 
States Code, relating to civil forfeitures shall extend to a 
seizure or forfeiture under this section, insofar as ap- 
plicable and not inconsistent with the provisions hereof, 
except that such duties as are imposed upon the Secretary of 
the Treasury under chapter 46 shall be performed with re- 
spect to seizures and forfeitures under this section by such 
officers, agents, or other persons as may be authorized or 
designated for that purpose by the Secretary of Health and 
Human Services . 

"Sec. 312. OlIMINAL FORFEITURE OF PROCEEDS OF 

FEDERAL FOOD, DRUG, AND COSMETIC ACT 
VIOLATIONS 

"(a) Any. person convicted of_a_violation of, or a 
conspiracy to violate, a provision of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 301-395) shall forfeit 
to the United States, irrespective of any provision of State 
law, any property constituting, or derived from, any pro- 
ceeds the person obtained, directly or indirectly, as the 
result of such violation. The court, in imposing sentence 
on such person, shall order that the person forfeit to the 
United States all property described in this subsection. 

" (b) Property subject to forfeiture under this section, 
any seizure and disposition thereof, and any administrative 
or judicial proceeding in relation thereto, shall be gov- 

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jrned by the provisions of section 413 of the Comprehensive 
Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. 

853), except for subsection 413(d) which shall not apply 
to forfeitures under this section." 
SEC. 315. SUMMARY DESTRUCTION OF EXPLOSIVES SUBJECT TO FORFEITURE 
Section 844(c) of title 18, United States Code, is amended - 

(1) by inserting "(1)" after "(c)"; and 

(2) by adding at the end the following new paragraphs: 

"(2) Notwithstanding paragraph (1), in the case of the 
seizure of any explosive materials for any offense for which 
the materials would be subject to forfeiture in which it 
would be impracticable or unsafe to remove the materials to 
a place of storage or would be unsafe to store them, the 
seizing officer may destroy the explosive materials, forth- 
with. Any destruction under this -paragraph shall be in the 
presence of at least one credible witness. The seizing 
officer shall ma)ce a report of the seizure and ta)ce samples 
as the Secretary may by regulation prescribe. 

"(3) Within 90 days after any destruction made pursuant 
to paragraph (2), the owner of (including any person having 
an interest in) the property so destroyed may make applica- 
tion to the Secretary for reimbursement of the value of the 
property. If the claimant establishes to the satisfaction 
of the Secretary that the claimant was an innocent owner as 
described in 18 U.S.C. 983, the Secretary shall make an 
allowance to the claimant not exceeding the value of the 

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property destroyed. The Secretary's determination of the 

fair market value of the property shall be final." 
SEC. 316. ARCHEOLOGICAL RESOURCES PROTECTION ACT 

Section 8 (b) of the Archeological Resources Protection Act 
of 1979 (16 U.S.C. 470gg(b)) is amended by -- 

(1) inserting "all proceeds derived directly or indirectly 
from such violation or any property traceable thereto, " before 
"and all vehicles" in the unnumbered paragraph; 

2) inserting "proceeds," before "vehicles" in paragraph (3); 
and 

3) inserting the following at the end of the subsection: 
"If a forfeiture count is included within an indictment in 

accordance with the Federal Rules of Criminal Procedure, and the 
defendant is convicted of the offense giving rise to the forfei- 
ture, the forfeiture may be ordered as ^lart of the criminal 
sentence in accordance with the procedures for criminal forfei- 
tures in Chapter 46 of title 18, United States Code. Otherwise, 
the forfeiture shall be civil in nature in accordance with the 
procedures for civil forfeiture in said Chapter 46 of title 18." 

TITLE IV - MISCELLANEOUS FORFEITURE AMENDMENTS 
SEC. 4 01. USE OF FORFEITED FUNDS TO PAY RESTITUTION TO CRIME 
VICTIMS AND REGULATORY AGENCIES 
(a) CIVIL FORFEITURE.-- Section 981(e) of title 18, United 
States Code, is amended -- 



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35-668 96-7 



190 



(1) by amending subsection (e) (G) to read as follows: 

"(6) as restoration to any victim of the offense giving 
rise to the forfeiture, including, in the case of a money 
laundering offense, any offense constituting the underlying 
specified unlawful activity; or" ; 

(2) in subsections (e) (3), (4) and (5), by striking "in 
the case of property referred to in subsection (a) (1) (C) " 
and inserting "in the case of property forfeited in connec- 
tion with an offense resulting in a pecuniary loss to a 
financial institution or regulatory agency" ; and 

(3) in subsection (e) (7) , by striking "in the case of 
property referred to in subsection (a) (1) (D) " and inserting 
"in the case of property forfeited in connection with an 
offense relating to the sale of assets acquired or held by 
any Federal financial institution or r egulatory agency, or 
person appointed by such agency, as receiver, conservator or 
liquidating agent for a financial institution". 

(b) CRIMINAL FORFEITURE.-- Section 982(b) of title 18, 
United States Code, is amended by adding the following new parag- 
raph: 

"(4) The provision relating to restitution in section 
413 (i) shall be construed to authorize the Attorney General 
to restore forfeited property, on such terms and conditions 
as he or she may determine, to any victim of an offense for 
which forfeiture is ordered under this section, or any 
victim of any offense that was part of the same scheme, 

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consp racy, or pattern of criminal activity, including, in 
the case of a money laundering offense, any offense consti- 
tuting the underlying specified unlawful activity. The 
Attorney General shall consider the restoration of forfeited 
property to victims to be the first priority in the distri- 
bution of forfeited property under this section after the 
costs of the investigation and forfeiture have been satis- 
fied." 

SEC. 402. ENFORCEMENT OF FOREIGN FORFEITURE JUDGMENT 

(a) IN GENERAL.-- Chapter 163 of Title 28, United States 

Code, is amended by inserting the following new section: 
"2466. Enforcement of foreign forfeiture judgment. 
"(a) Definitions. As used in this section -- 

" (1) "Foreign nation" shall mean a country that has 
become a -party to the United Natioftc—Convention Against 
Illicit Traffic in Narcotic Drugs and Psychotropic Substanc- 
es (hereafter "the United Nations Convention") or a foreign 
jurisdiction with which the United States has a treaty or 
other formal international agreement in effect providing for 
mutual forfeiture assistance. 

"(2) "Value based confiscation judgment" shall mean a 
final order of a foreign nation compelling a defendant, as a 
consequence of his or her criminal conviction for an offense 
described in Article 3, Paragraph 1, of the United Nations 
Convention, to pay a sum of money representing the proceeds 



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of such offense, or property the value of which corresponds 
to such proceeds. 

"(b) Review by Attorney General. A foreign nation seeking 
to have its value based confiscation judgment registered and 
enforced by a United States district court under this section 
must first submit a request to the Attorney General or his or her 
designee. Such request shall include: 

" (1) a summary of the facts of the case and a descrip- 
tion of the criminal proceeding which resulted in the value - 
based confiscation judgment; 

" (2) certified copies of the judgment of conviction and 
value -based confiscation judgment; 

" (3) an affidavit or sworn declaration establishing 
that the defendant received notice of the proceedings in 
sufficient time to enable him or heX-to defend against the 
charges that the value-based confiscation judgment rendered 
is in force and is not subject to appeal; 

"(4) an affidavit or sworn declaration that all 
reasonable efforts have been undertaken to enforce the 
value-based confiscation judgment against the defendant's 
property, if any, in the foreign country; and 

" (5) such additional information and evidence as may be 
required by the Attorney General or his or her designee. 
The Attorney General or his or her designee, in consultation with 
the Secretary of State or his or her designee, shall determine 
whether to certify the request, and such decision shall be final 

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and not subject to either judicial review or review und ^r the 
Administrative Procedures Act, 5 U.S.C. 551 et sea . 

"(c) Jurisdiction and Venue. Where the Attorney General or 
his or her designee certifies a request under paragraph (b) , the 
foreign nation may file a civil proceeding in United States 
district court seeking to enforce the foreign value based confis- 
cation judgment as if the judgment had been entered by a court in 
the United States. In such a proceeding, the foreign nation 
shall be the plaintiff and the person against whom the value- 
based confiscation judgment was entered shall be the defendant. 
Venue shall lie in the district court for the District of Colum- 
bia or in any other district in which the defendant or the prope- 
rty that may be the basis for satisfaction of a judgment under 
this section may be found. The district court shall have per- 
sonal jurisdi-ction over a defendant residing outside of the 
United States if the defendant is served with process in accor- 
dance with Rule 4 of the Federal Rules of Civil Procedure. 

"(d) Entry and Enforcement of Judgment. (1) Except as 
provided in paragraph (2) , the district court shall enter such 
orders as may be necessary to enforce the value-based confisca- 
tion judgment on behalf of the foreign nation where it finds that 
all of the following requirements have been met: 

" (A) the value-based confiscation judgment was rendered 
under a system which provides impartial tribunals or proce- 
dures compatible with the requirements of due process of 
law; 

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194 



" (B) the i Dreign court had personal jurisdiction over 

the defendant; 

" (C) the foreign court had jurisdiction over the sub- 
ject matter; 

" (D) the defendant in the proceedings in the foreign 

court received notice of the proceedings in sufficient time 

to enable him or her to defend; and 

" (E) the judgment was not obtained by fraud. 
Process to enforce a judgment under this section will be in 
accordance with Rule 69(a) of the Federal Rules of Civil Proce- 
dure . 

"(e) Finality of Foreign Findings. Upon a finding by the 
district court that the conditions set forth in subsection (d) 
have been satisfied, the court shall be bound by the findings of 
facts insofar as they are stated in the— foreign judgment of 
conviction and value-based confiscation judgment. 

" (f ) Currency Conversion. Insofar as a value based confis- 
cation judgment requires the payment of a sum of money, the rate 
of exchange in effect at time when the suit to enforce is filed 
by the foreign nation shall be used in calculating the amount 
stated in the judgment submitted for registration." 

(b) CONFORMING AMENDMENT.-- The chapter analysis for Chapter 
163, Title 28, United States Code, is amended by inserting the 
following at the end: 

"2466. Enforcement of foreign forfeiture judgment" 



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SEC. 403. MINOR AND TECHNICAL AMENDMENT.': RELATING TO 1992 FORFEI- 
TURE AMENDMENTS. 

(a) CRIMINAL FORFEITURE.-- Section 982(b) of title 18, 
United States Code, is amended in subsection (b) (2) , by striking 
"The substitution" and inserting "With respect to a forfeiture 
under subsection (a)(1), the substitution". 

(b) FUNGIBLE PROPERTY.-- Section 984 of title 18, United 
States Code, is amended -- 

(1) by strilcing subsection (a) and redesignating the remain- 
ing subsections as (a) , (b) , and (c) , respectively; 

(2) by amending subsection (b) (as redesignated) to read as 
follows : 

" (b) The provisions of this section may be invoked only 
if the action for forfeiture was commenced by a seizure or 
an arrest in rem within two years _iif- the offense that is the 
basis for the forfeiture."; 

(3) by amending subsection (c) (1) (as redesignated) to read 
as follows: 

" (c) (1) Subsection (a) shall not apply to an action again- 
st funds held by a financial institution in an interbank 
account unless the account holder knowingly engaged in the 
offense that is the basis for the forfeiture."; 

(4) by adding the following new paragraph to subsection (c) 
(as redesignated) : 



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"(3) As used in this subsection, a "financial institu- 
tion" includes a foreign bank, as defined in paragraph 7 of 
section 1(b) of the International Banking Act of 1978."; and 
(5) by adding the following new subsection: 

" (d) Nothing in this section is intended to limit the 
ability of the government to forfeit property under any 
statute where the property involved in the offense giving 
rise to the forfeiture or property traceable thereto is 
available for forfeiture." 

(c) SUBPOENAS FOR BANK RECORDS.-- Section 986(a) of title 
18, United States Code, is amended by -- 

(1) striking "section 1956, 1957 or 1960 of this title, 
section 5322 or 5324 of title 31, United States Code" and insert- 
ing "section 981 of this title"; and 

(2) striJcing the last sentence. „. . 

(d) ORDER OF FORFEITURE.-- Section 3554 of title 18, United 
States Code, is amended -- 

(1) by striking "an offense described in section 1962 of 
this title or in title II or III of the Comprehensive Drug Abuse 
Prevention and Control Act of 1970" and inserting "an offense for 
which criminal forfeiture is authorized"; and 

(2) by inserting "pursuant to Rule 32, Federal Rules of 
Criminal Procedure," after "shall order,". 

(e) CMIR OFFENSES.-- Section 5324(b) of title 31, United 
States Code, is amended -- 



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(1) in paragraph (1) . by inserting "or attempt to fail to 
file" after "fail to file", the first time it appears; and 

(2) in paragraph (2), by inserting ", attempt to file," 
after "file", the first time it appears. 

(f) CIVIL MONEY LAUNDERING ENFORCEMENT.-- Section 1956(b) of 
title 18, United States Code, is amended -- 

(1) by redesignating the present matter as paragraph (1) , 
and the present paragraphs (1) and (2) as sub-paragraphs (A) and 
(B) , respectively; and 

(2) by inserting the following new paragraphs: 

" (2) For purposes of adjudicating an action filed or 
enforcing a penalty ordered under this section, the district 
courts shall have jurisdiction over any foreign person, 
including any financial institution registered in a foreign 
country,- that commits an offense unde r subsection (a) 
involving a financial transaction that occurs in whole or in 
part in the United States, provided that service of process 
upon such foreign person is made under the Federal Rules of 
Civil Procedure or the laws of the country where the foreign 
person is found. 

"(3) The court may issue a pre-trial restraining order 
or take any other action necessary to ensure that any bank 
account or other property held by the defendant in the 
United States is available to satisfy a judgment under this 
section. " 



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SEC. 404. CIVIL FORFEITURE OF COINS AND CURRENCY TN CONFISCATED 
GAMBLING DEVICES 
Section 7 of Public Law 81-906 (15 U.S.C. 1177) is amend- 
ed- - 

(1) by inserting "Any coin or currency contained in 
any gambling device at the time of its seizure pursuant to 
the preceding sentence shall also be seized and forfeited to 
the United States. " after the first sentence; and 

(2) in the last sentence, by inserting ", coins, or 
currency" after "gambling devices". 

SEC. 405. DRUG PARAPHERNALIA TECHNICAL AMENDMENTS 

(a) Section 511(a) (10) of the Controlled Substances Act (21 
U.S.C. 881(a) (10)) is amended by striking "857 of this title" and 
inserting "422 of this subchapter (21 U.S.C. 863)". 

(b) Section 422 of the Control led_Substances Act (21 U.S.C. 
8 63) is amended: 

(1) by deleting subsection (c) ; and 

(2) by redesignating subsections (d) , (e) and (f ) to be 
subsections (c) , (d) and (e) . 

SEC. 4 06. AUTHORIZATION TO SHARE FORFEITED PROPERTY WITH COOPER- 
ATING FOREIGN GOVERNMENTS. 
(a) IN GENERAL.-- Section 981(i)(l) of title 18, United 
States Code, is amended by striking "this chapter" and inserting 
"any provision of federal law". 



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(b) TONFORMING AMENDMENT.-- Section 511(e)(1) of the Con- 
trolled Substances Act is amended by strilcing " ; or" and all of 
sub-paragraph (E) and inserting a period. 
SEC. 407. FORFEITURE OF COUNTERFEIT PARAPHERNALIA 

Section 492 of title 18, United States Code, is amended -- 

(1) by striking the third and fourth undesignated paragrap- 
hs; 

(2) by designating the remaining paragraphs as subsections 
(a) and (b) ; 

(3) by adding the following new subsections: 

" (c) For the purposes of this section, the provisions 
of the customs laws relating to the seizure, summary and 
judicial forfeiture, condemnation of property for violation 
of the customs laws, the disposition of such property or the 
proceeds- from the sale of such property, the remission or 
mitigation of such forfeitures, and the compromise of claims 
(19 U.S.C. 1602 et seg. ) , insofar as they are applicable 
and not inconsistent with the provisions of this section, 
shall apply to seizures and forfeitures incurred, or alleged 
to have been incurred, under this section, except that the 
duties as are imposed upon the customs officer or any other 
person with respect to the seizure and forfeiture of proper- 
ty under the customs laws shall be performed with respect to 
seizures and forfeitures of property under this section by 
such officers, agents, or other persons as may be authorized 



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or designated for that purpos« by the Secretary of the 
Treasury. 

" (d) All seizures and civil judicial forfeitures pursu- 
ant to subsection (a) shall be governed by the procedures 
set forth in chapter 46 of this title pertaining to civil 
forfeitures. The Attorney General shall have sole responsi- 
bility for disposing of petitions for remission or mitiga- 
tion with respect to property involved in a judicial forfei- 
ture proceeding. 

" (e) A court in sentencing a person for a violation of 
this chapter or of sections 331-33, 335, 336, 642 or 1720 of 
this title, shall order the person to forfeit the property 
described in subsection (a) in accordance with the proce- 
dures set forth in section 982 of this title."; and 
(4) in snbsection (b) , as so desigftetted by this section, by 
striking "fined not more than $100" and inserting "fined under 
this title". 

SEC. 408. CLOSING OF LOOPHOLE TO DEFEAT CRIMINAL FORFEITURE 
THROUGH BANKRUPTCY. 

(a) RICO.-- Section 1963(a) of title 18, United States Code, 
is amended by inserting ", or of any bankruptcy proceeding in- 
stituted after or in contemplation of a prosecution under this 
chapter" after "shall forfeit to the United States, irrespective 
of any provision of State law" ; 

(b) CONTROLLED SUBSTANCES.-- Section 413(a) of the Controll- 
ed Substances Act (21 U.S.C. 853(a)) is amended by inserting ", 

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or of any bankruptcy proceeding instituted after or in contem- 
plation of a prosecution of such violation" after "shall forfeit 
to the United States, irrespective of any provision of State 
law" . 
SEC. 409. STATUTE OF LIMITATIONS FOR CIVIL FORFEITURE ACTIONS 

(a) IN GENERAL.-- Section 621 of the Tariff Act of 1930 (19 
U.S.C. 1621) is amended by inserting ", or in the case of 
forfeiture, within five years after the time when the involvement 
of the property in the alleged offense was discovered" after 
"within five years after the time when the alleged offense was 
discovered" . 

(b) FIRREA CASES.-- Section 981(a) of title 18, United 
States Code, is amended by adding at the end a new paragraph, as 
follows : 

"(4) An .action seeking the forfei ture of property described 
in subparagraph (a) (1) (C) arising out of an offense affecting a 
financial institution or the conservator or receiver of a finan- 
cial institution may be commenced not later than ten years after 
the discovery of the involvement of the property in the act 
giving rise to the forfeiture. This paragraph shall apply to any 
forfeiture action not barred by the expiration of the limitation 
period provided by Section 621 of the Tariff Act of 1930 (19 
U.S.C. Sec. 1621) at the time this paragraph became effective." 
SEC. 410. ASSETS FORFEITURE FUND AND PROPERTY DISPOSITION 

(a) TECHNICAL AMENDMENTS .- -Section 524 of title 28, United 
States Code, is amended -- 

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202 



(1) in paragraph (c) (1) by striking "and" at the end of 
subparagraph (H) , by striking the second subparagraph (I) that 
begins with "after all reimbursements" and ends with "correction- 
al institutions", and by inserting "and" following the semicolon 
at the end of the remaining subparagraph (I) ; 

(2) in paragraph (c) (3) , by deleting " (F) " and inserting 
"(G)"; 

(3) in subparagraph (c) (4) (C) by deleting "(g) (4) (A) (ii)"; 

(4) in subparagraph (c) (8) (A) , by striking " (A) (iv) , (B) , 
(C) , (F) , (G) , and (H) " and inserting " (A) (ii) , (B) , (C) , (F) and 
(G) " ; 

(5) in subparagraph (c) (8) (E) , by deleting "103-121" and 
inserting "103-317"; and 

(6) by repealing paragraph (c) (6), and renumbering para- 
graphs (c) (7) through (c) (11) as parag raphs (c) (6) through 
(c) (10) . 

(b) DISPOSAL OF FORFEITED PROPERTY.-- Section 524(c) (8), 
of title 28, United States Code, as redesignated by this Section, 
is amended to read as follows: 

" (8) Following the completion of procedures for the 
forfeiture of property pursuant to any law enforced or 
administered by the Department, the Attorney General, under 
such terms and conditions as the Attorney General shall 
specify, is authorized to: 

" (A) destroy the property if it is unsuitable for 
public use or sale, or uneconomical to market; 

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" (B) transfer the property to any lienholder 
(including taxing authorities) or mortgagee in lieu of 
the compromise and payment of a valid lien or mortgage 
against the property; 

" (C) disburse all or part of an amount forfeited 
as restoration to any victim of the offense giving rise 
to the forfeiture, or any other offense that was part 
of the same scheme, conspiracy, or pattern of criminal 
activity, including, in the case of a money laundering 
offense, any offense constituting the underlying speci- 
fied unlawful activity, in accordance with the relevant 
forfeiture statute; 

" (D) dispose of the property by public sale or any 
other commercially feasible means; or request the 
General Services Administration to take custody of the 
property and to dispose of it in accordance with law; 

" (E) place the property into official use or 
transfer the property to any other federal agency for 
official use; 

" (F) transfer the property to foreign governments 
pursuant to title 18, United States Code, section 
981(i) ; 

" (G) transfer the property, or the net proceeds of 
sale of the property, to State or local law enforcement 
agencies that participated directly in any of the acts 
that led to the seizure or forfeiture of the property, 

85 



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in accordance with title 18, United States Code, sec- 
tion 981(e); section 511(e)(3) of the Controlled Sub- 
stances Act (21 U.S..''. 881(e) (3)); or any other 
provision of law pertaining to the equitable sharing of 
forfeited property; 

" (H) transfer real or personal property that is 
uneconomical to store, maintain, or market to a State 
or local government agency for use to support drug 
abuse treatment, drug and crime prevention and educa- 
tion, housing, job skills, and other community-based 
public health and safety programs, upon agreement by 
the recipient government to accept liability for the 
compromise or settlement of any mortgages, liens, 
petitions or other claims against the property; 

" (I) make any other disposition authorized by law; 
and 

" (J) warrant clear title to any subsequent pur- 
chaser or transferee of such property. 
"The Attorney General shall make due provision for the 
property rights of innocent persons in disposing of forfeit- 
ed property. Election of the method of disposition is 
solely within the discretion of the Attorney General. Final 
orders of judgment for damages arising from any warranty of 
title by the Attorney General shall be satisfied pursuant to 
title 31, United States Code, section 1304 in the same 
manner and to the same extent as other judgments for damag- 

86 



205 



es. A decision by the Attorney General pursuant to thir 
subsection shall not be subject to review." 

(c) DEPOSIT FROM SETTLEMENT IN LIEU OF FORFEITURE .- - 
Section 524(c)(4)(A) of title 28, United States Code, is amended 
by inserting ", or from any settlement in lieu of forfeiture," 
before "under any law". 

(d) DEPOSITS INTO THE FUND.-- Section 524(c)(4)(B) of title 
26, United States Code, is amended by inserting ", and all amoun- 
ts representing reimbursement or recovery of costs paid by the 
Fund" immediately prior to the semi-colon. 

(e) PAYMENT OF FOREIGN JUDGMENTS.-- Section 524(c) (1) of 
title 28, United States Code, is amended by inserting the follow- 
ing new subparagraph (J) immediately following subparagraph (I): 

"(J) at the discretion of the Attorney General, pay- 
ments to^ return forfeited propert y rep atriated to the United 
States by a foreign government or others acting at the 
direction of a foreign government, and interest earned on 
such property, subject to the following conditions: 

" (i) a final foreign judgment entered against a 
foreign government or those acting at its direction, 
which foreign judgment was based on the measures, such 
as seizure and repatriation of property, that resulted 
in deposit of the funds into the Fund; 

" (ii) such foreign judgment was entered and pre- 
sented to the Attorney General within five years of the 



87 



206 



date that "he property was repatriated to the United 
States; 

" (iii) the foreign government or those acting at 
its direction vigorously defended its actions under its 
own laws; and 

" (iv) the amount of the disbursement does not 
exceed the amount of funds deposited to the Fund, plus 
interest earned on such funds pursuant to 28 U.S.C. 

524 (c) (5) , less any awards and equitable shares paid 
by the Fund to the foreign government or those acting 
at its direction in connection with a particular 
case . " . 

(f) EXCESS SURPLUS FUNDS.-- Section 524(c) (7) (E) of title 
28, United States Code, as redesignated by this Section, is 
amended by inserting ", and on Septemb er 3 of each fiscal year 
thereafter," after "September 30, 1994". 

(g) REMISSION AND MITIGATION.-- Section 524(c) (1) (E) of 
title 28, United States Code, is amended to read as follows: 

" (E) disbursements authorized in connection with remis- 
sion or mitigation procedures or other actions pursuant to 
the Attorney General's statutory authority relating to 
property forfeited under any law enforced or administered by 
the Department of Justice;" 
SEC. 411. CLARIFICATION OF 21 U.S.C. 877 

Section 507 of the Controlled Substances Act (21 U.S.C. 
877) is amended to add at the end the following sentence: 



88 i; 



207 



"This section does not apply to any findings, ccr.clusions , 
rulings, decisions, or declarations of the Attorney General, or 
any designee of the Attorney General, relating to the seizure, 
forfeiture, or disposition of forfeited property brought under 
this subchapter." 
SEC. 412. CERTIFICATE OF REASONABLE CAUSE 

Section 2465 of title 28, United States Code, is amended -- 

(1) by striking "property seized" and inserting "property 
seized or arrested" and 

(2) by striking "seizure" each time it appears and inserting 
"seizure or arrest". 

SEC. 413. CONFORMING TREASURY AND JUSTICE FUNDS 

(a) Section 9703(c) of title 31, United States Code, is 
amended by striking "subsection (g) (2) " and inserting "subsection 
(g) (1)" and by deleting "in excess of $10,000,000 for a fiscal 

year. " 

(b) Section 9703(g) of title 31, United States Code, is 
amended- - 

(1) in paragraph (1), by striking "subsection (a) (1)" and 
inserting "subsections (a) (1) and (c)"; and 

(2) in paragraph (2) , by striking "subsections (a) (2) and 
(c) " and inserting "subsection (a)(2)". 

(c) DEPOSIT FROM SETTLEMENT IN LIEU OF FORFEITURE . -- 
Section 9703(d) of title 31, United States Code, is amended by 
inserting "or from any settlement in lieu of forfeiture," before 
"under any law" each time it appears. 

89 



208 



(d) Subsection 524(c)(7) of title 25, United States Code, is 
amended by adding the following sentence to the end thereof: 

"Amounts transferred by the Secretary of Treasury pursuant 
to section 9703 of title 31, or by the Postmaster General 
pursuant to section 2003 of title 39, shall be available to 
the Attorney General for federal law enforcement and crimi- 
nal prosecution purposes of the Department of Justice." 
SEC. 414. DISPOSITION OF PROPERTY FORFEITED UNDER CUSTOMS LAWS. 
Section 616A of the Tariff Act of 1930 (19 U.S.C. 1616a) 
is amended -- 

(1) by adding the following new paragraph to subsection (c) : 

"(4) Whenever property is civilly or criminally for- 
feited by or for the United States Customs Service, the 
Secretary of the Treasury may dispose of the property in 
accordance with law, including -- 

" (A) by selling the property through any commercially 
feasible means, provided that the property is not required 
to be destroyed by law and is not harmful to the public; or 

" (B) by requesting the General Services Administration 
to take custody of the property and to dispose of it in 
accordance with law."; and 

(2) by amending the title of the section to read as follows: 
"Retention, transfer, or disposition of forfeited property". 
SEC. 415. TECHNICAL AMENDMENTS RELATING TO OBLITERATED MOTOR 

VEHICLES IDENTIFICATION NUMBERS. 
Section 512 of title 18, United States Code, is amended -- 

90 



209 



(1) in subsection (b) , by inserting "and the provisions of 
chapter 46 of this title relating to civil judicial forfeitures" 
before "shall apply"; and 

(2) in subsection (a) (1) , by striking "does not know" and 
all that follows up to the semi-colon and inserting "is an in- 
nocent owner as defined in section 983 of this title". 

SEC. 416. FUGITIVE DISENTITLEMENT 

(a) IN GENERAL.-- Chapter 163 of title 28, United States 
Code, is amended by inserting the following new section: 

2468. Fugitive disentitlement 

"Any a person who, in order to avoid criminal prosecution, 
purposely leaves the jurisdiction of the United States, declines 
to enter or re-enter the United States to submit to its jurisdic- 
tion, or otherwise evades the jurisdiction of the court where a 
criminal case is pending, may not use the resources of the courts 
of the United States in furtherance of a claim in any related 
civil forfeiture action or a claim in third-party proceedings in 
any related criminal forfeiture action." 

(b) CONFORMING AMENDMENT.-- The chapter analysis for chapter 
163 of title 28, United States Code, is amended by inserting the 
following at the end: 

"2468. Fugitive disentitlement" 
SEC. 417. ADMISSIBILITY OF FOREIGN BUSINESS RECORDS 

(a) IN GENERAL.-- Chapter 163 of title 28, United States 
Code, is amended by adding at the end the following new section: 

2469. Foreign Records 

91 



210 



" (a) In a civil proceeding in a court of the United States, 
including civil forfeiture proceedings and proceedings in the 
United States Claims Court and the United States Tax Court, a 
foreign record of regularly conducted activity, or copy of such 
record, obtained pursuant to an official request, shall not be 
excluded as evidence by the hearsay rule if a foreign certifica- 
tion, also obtained pursuant to the same official request or 
subsequent official request that adequately identifies such 
foreign record, attests that-- 

" (1) such record was made, at or near the time of the occur- 
rence of the matters set forth, by (or from information 
transmitted by) a person with knowledge of those matters; 
" (2) such record was kept in the course of a regularly 
conducted business activity; 

"(3) the business activity made such a record as a regular 
practice; and 

" (4) if such record is not the original, such record is a 
duplicate of the original; 

unless the source of information or the method or circumstances 
of preparation indicate lack of trustworthiness. 

" (b) A foreign certification under this section shall 
authenticate such record or duplicate. 

" (c) As soon as practicable after a responsive pleading has 
been filed, a party intending to offer in evidence under this 
section a foreign record of regularly conducted activity shall 

92 



211 



provide writtei notice of that intention to each other party. A 
motion opposing admission in evidence of such record shall be 
made by the opposing party and determined by the court before 
trial. Failure by a party to file such motion before trial shall 
constitute a waiver of objection to such record or duplicate, but 
the court for cause shown may grant relief from the waiver. 
" (d) As used in this section, the term-- 

" (1) "foreign record of regularly conducted activity" 
means a memorandum, report, record, or data compilation, in 
any form, of acts, events, conditions, opinions, or diagno- 
ses, maintained in a foreign country; 

" (2) "foreign certification" means a written declara- 
tion made and signed in a foreign country by the custodian 
of a record of regularly conducted activity or another 
qualified person, that if falsely mad e, would subject the 
maker to criminal penalty under the law of that country; 

"(3) "business" includes business, institution, associ- 
ation, profession, occupation, and calling of every kind 
whether or not conducted for profit; and 

" (4) "official request" means a letter rogatory, a 
request under an agreement, treaty or convention, or any 
other request for information or evidence made by a court of 
the United States or an authority of the United States 
having law enforcrament responsibility, to a court or other 
authority of a foreign country." 

93 



212 



(b) CONFORMING AMENDMENT.-- T e chapter analysis for chapter 
163 of title 28, United States Code, is amended by inserting the 
following at the end: 

"24 69. Foreign Records" 
SEC. 418. AMENDMENT TO FINANCIAL INSTITUTIONS REFORM AND RECOVERY 
ACT OF 1989 

Section 3322(a) of title 18, United States Code, is amended 
by striking "concerning a banking law violation" . 



94 



213 



JEC. 419. PROSPECTIVE APPLICATION 

(a) IN GENERAL.-- Unless otherwise specified in this section 
or in another provision of this Act, all amendments in this Act 
shall apply to forfeiture proceedings commenced on or after the 
effective date of this Act. 

(b) ADMINISTRATIVE FORFEITURES.-- All amendments in this Act 
relating to seizures and administrative forfeitures shall apply 
to seizures and forfeitures occurring on or after the sixtieth 
day after the effective date of this Act. 

(c) CIVIL JUDICIAL FORFEITURES.-- All amendments in this Act 
relating to the judicial procedures applicable once a civil 
forfeiture complaint is filed by the government shall apply to 
all cases in which the forfeiture complaint is filed on or after 
the sixtieth day after the effective date of this Act. 

(d) CRIMINAL FORFEITURE.-- All am endme nts in this Act relat- 
ing to the procedures applicable in criminal forfeiture cases 
shall apply to cases in which the indictment or information is 
filed on or after the effective date of this Act. 

(e) SUBSTANTIVE LAW.-- All amendments in this Act expanding 
substantive forfeiture law to make property subject to civil or 
criminal forfeiture which was not previously subject to forfei- 
ture shall apply to offenses occurring on or after the effective 
date of this Act. 



95 



214 

Mr. Casselij^. Thank you, Mr. Chairman. 

My name is Stefan Cassella. I am Deputy Chief of the Asset For- 
feiture and Money Laundering Section of the Department of Jus- 
tice. 

Mr. Chairman, I would hke to summarize my testimony by mak- ^ 
ing three points: that asset forfeiture has become an essential tool •' 
of Federal law enforcement, that we support legislation that would ' I 
ensure that this essential tool operates fairly, and that we also i 
need legislation to make forfeiture even more effective as a weapon > 
in the war on crime. 

Forfeiture has been part of Federal law for over 200 years. It 1 1 
started as tool against pirate ships and whiskey stills and is now ii 
used as a weapon against crimes ranging from gambling, to child ,( 
pornography, to bank fraud, to narcotics. ! 

Civil forfeiture is particularly important because it allows us to |* 
reach assets that cannot be reached any other way, like the bank || 
accounts of the leaders of the Colombian drug cartels, or airplanes 
used to smuggle drugs, or crack houses from which drugs are dis- 
pensed to our children on the way to school. 

Since 1991 we have averaged nearly half a billion dollars a year 
in deposits into the Justice Assets Forfeiture Fund. That is half a 
billion dollars that drug dealers couldn't use to buy and smuggle 
more drugs, to bribe public officials, to invest in our infrastructure, 
or to live a life of luxury financed by the suffering and exploitation 
of children and the destruction of our cities. 

Moreover, that money is used to support the operation of law en- 
forcement itself. About half of the money that we forfeit is shared 
with State and local law enforcement agencies. 

There is poetic justice in this, Mr. Chairman. Forfeiture not only 
lets us take the profit out of crime; it provides support for the law 
enforcement agencies who catch the criminals and put them in jail. 

Asset forfeiture is an essential law enforcement tool, but like any 
such tool, it must have one essential component; it must be fair. 
No system, no program, no tool of law enforcement however effec- 
tive at fighting crime can survive for long if the public thinks that 
it violates the basic principles of fairness and due process that lie 
at the core of the American system of justice. 

The procedures we use today are sound, but they are the ones 
that were developed under the Customs laws a century ago. They 
have never been updated. While they may have been adequate 
when we were forfeiting pirate ships and whiskey stills, when we 
forfeit peoples' houses, cars, businesses and bank accounts, a high- 
er standard is required. 

We have spent a great deal of time over the past several years 
working to produce a comprehensive and balanced set of forfeiture 
reforms. We wanted to produce a bill that enhances the due process 
rights of property owners while preserving the ability of law en- 
forcement to use forfeiture to take the profit out of crime. We think 
we have done that. 

The bill we submitted to Congress last week incorporates all the 
13 principles for forfeiture reform that were endorsed by the Amer- 
ican Bar Association earlier this year, and it includes the key re- 
forms that you have proposed in H.R. 1916. 



215 

For example, we think the burden of proof in a civil forfeiture 
case should be on the government not on the property owner. We 
think the statutes should be amended to give property owners 
ample time to file claims, and we think that the interests of inno- 
cent owners should be protected. 

The Supreme Court held this term that the Constitution does not 
prohibit the Grovernment from forfeiting property of an innocent 
person. Maybe so, but Congress by statute can provide more protec- 
tion than the Constitution requires, and we think it should. 

There are many other provisions of our bill in the same vein, but 
let me turn to my third point. It is well to revise the forfeiture laws 
to ensure that they work fairly, and this we fully support. But 
there is also much to be done to enhance forfeiture as a tool of law 
enforcement. 

With respect to our ability to forfeit the proceeds of crime, forfeit- 
ure laws are very much a hit-or-miss proposition. We can forfeit 
the proceeds of bank fraud, but not the proceeds of consumer fraud. 
We can forfeit proceeds in a drug case, but not money paid to a hit 
man in a murder for-hire case. 

As the ABA recognized in its 13 principles, no one should have 
the right to retain the proceeds, of crime, so we propose that the 
proceeds of all crimes in the Federal criminal code be subject to for- 
feiture. 

Also, the law must be clear that proceeds means gross proceeds, 
not net profit. Last month a Federal judge in Chicago held that 
when we forfeit drug money from a heroin dealer, we must give the 
dealer credit for the cost of the heroin. That is wrong. 

Drug dealers should not be allowed to deduct the cost of doing 
business any more than a terrorist should be allowed to deduct the 
cost of the truck he uses to blow up a Federal building or barracks 
housing American soldiers. 

The forfeiture laws also need to be strengthened to enable us to 
deal more effectively with crimes and criminals that do not respect 
international borders. And we need to clarify our authority to re- 
store forfeited property to victims. Every year, we use the forfeiture 
laws, Mr. Chairman, to restore property to victims in cases where 
there are victims. We can do that in some cases, but not in others. 
Correction of this oversight is long overdue. 

Mr. Chairman, in these and many other ways the asset forfeiture 
laws can be greatly improved. Under our balanced proposal, the 
forfeiture laws of the United States will be tough but fair, tough 
but fair, which is exactly what the American people have the right 
to expect. 

Thank you, Mr. Chairman. 

Mr. Hyde. Thank you, Mr. Cassella. 

[The prepared statement of Mr. Cassella follows:] 



216 

Prepared Statement ok Stefan D. Cassella, Deputy Chief, Asset Forfeiture 
AND Money I^aundering Section, Department of Juctice i 

Mr. Chairman and Members of the Committee, I appreciate the 
opportunity appear before you today on behalf of the Departm.ent 
of Justice to comment on legislation revising the asset 
forfeiture laws. Mr. Chairman and Congressman Conyers, the 
Department of Justice particularly appreciates your leadership 
and longstanding interest concerning asset forfeiture. The 
Department of Justice welcomes the opportunity to work with you 
on this important issue. 

The Importance of Forfeiture 

Forfeiture has been part of federal law for 200 years. The 
First Congress, in 1789, passed forfeiture statutes under the 
Customs laws that were used to confiscate pirate ships, smuggled 
goods and other contraband. Forfeiture played an important role 
during the Civil War (Arlington Cemetery sits on land forfeited 
from the family of General Robert E. Lee) , and in this Century, 
it was part of the enforcement of the alcohol laws during 
Prohibition. 

In the last decade, forfeiture has become an essential part 
of many areas of federal law enforcement from gambling to child 
pornography to bank fraud to narcotics. It is no exaggeration to 
say that the use of forfeiture in these areas has given us the 
strongest and most effective new law enforcement tool that we 
have seen in the last 25 years. It allows us to take the profit 
out of crime and to remove the instrumentalities of crime from 
circulation. 

Civil and Criminal Forfeiture 

As the Committee is aware, there are two types of forfeiture 
statutes: civil forfeiture statutes that authorize the government 
to proceed directly against property derived from or used to 
commit a criminal offense; and criminal forfeiture statutes that 
allow the court in a criminal case to order the forfeiture of the 
convicted defendant's interest in such property as part of his 
sentence. We use both kinds of forfeiture statutes, but civil 
forfeiture is particularly important because it allows us to 
reach assets that cannot be reached any other way. 

For example, we recently forfeited a ranch in Montana owned 
by one of the leaders of the Colombian drug cartel. As long as a 
cartel leader remains a fugitive, you can't prosecute him, and if 
you can't prosecute someone you can't do criminal forfeiture as 
part of his sentence. But through civil forfeiture we can reach 
property traceable to the proceeds of crime, or used to 
facilitate the commission of the crime, even if the criminal 
remains abroad. 



217 



Likewise, we can seize airplanes used to smuggle drugs, and 
vessels used to smuggle illegal aliens. Criminal forfeiture 
doesn't help us there because while we can prosecute the pilot of 
the plane or the captain of the ship, he isn't the owner of the 
property. Again, only the defendant's property can be forfeited 
in a criminal case. A plane used to smuggle drugs is likely 
registered to a shell corporation in Panama; if all we could do 
is prosecute the pilot, we would have to return the plane to its 
owner. But with civil forfeiture, we can take that plane out of 
circulation so it can't be used again for illegal purposes. 

The same is true for an apartment building that the tenants 
have turned into a crack house, with the landlord's knowledge and 
consent, or a farm that a farmer has allowed drug dealers to use 
as a landing strip. You can prosecute the tenants or the 
smugglers but not shut down the crack house or the landing strip 
because the defendants don't own the property. With civil 
forfeiture, however, we can forfeit the property if the owner 
knew about the illegal activity and allowed his property to be 
used to commit it. 

The Assets Forfeiture Fund 

The Department of Justice Assets Forfeiture Fund is a 
mechanism to hold the proceeds of Department of Justice 
forfeitures and to fund certain forfeiture-related expenses and 
law enforcement activities. Since 1991 we have averaged nearly 
half a billion dollars a year in deposits into this fund. The 
statistics for the period from FY92 through FY96 are as follows 
(in millions) : 

FY92 FY93 FY94 FY95 FY96 

$531.0 $555.7 $549.9 $487.5 $325.0 

(the figure for FY96 is a projection based on current receipts) . 

These figures, which do not include additional sums that 
were confiscated from defendants and returned to victims, 
lienholders, and other innocent third parties under the 
forfeiture laws, represent hundreds of millions of dollars that 
criminals do not have to enjoy or to use to perpetuate criminal 
activities. It is money that drug dealers don't have to buy and 
smuggle more drugs, or live a life of luxury financed by the 
suffering and exploitation of children and destruction of our 
cities. It's money that pornographers don't have to maintain 
warehouses of obscene materials, and money that gamblers don't 
have to finance racketeering enterprises. 

Moreover, that money is used to support the operation of law 
enforcement itself. About half of the money forfeited by the DOJ 
is shared with state and local law enforcement. For the period 



218 



from FY92 through FY96, the figures for equitable sharing with 
state and local law enforcement agencies are as follows (in 
nillions) : 

FY92 FY93 FY94 FY95 FY96 

$246.6 $224.5 $228.9 $228.7 $175 

(the figure for FY96 is a projection based on current estimates.) 

Uses of Funds bv Local Law Enforcement 

Thus, our forfeiture laws not only let us take the profit 
out of crime; they provide support for the law enforcement 
agencies who catch the criminals and bring them to justice. 

State and local law enforcement agencies are permitted to 
apply the funds received through the equitable sharing program to 
any legitimate law enforcement purpose. In addition, they are 
authorized to pass up to 15 per cent of the federal funds on to 
community-based organizations that assist the law enforcement 
agencies in their crime control mission through treatment and 
prevention of drug abuse. The following are some recent examples 
of the ways in which forfeited funds have been applied under this 
program: 

■ Lake Careco Road, Cobb County, Georgia -- A 35-acre 
undeveloped wooded property was forfeited from 
defendant who grew marijuana for distribution. In 
response to a community group, the property was 
transferred to the Georgia Sheriffs' Youth Homes, Inc., 
for use as a nature preserve and camping facility for 
organizations involved in youth education. 

■ United Neighbors Against Drugs, Philadelphia, 
Pennsylvania -- This property was transferred to a non- 
profit organization, which uses the property as a safe 
haven where social services, GED classes, and drug 
counselling are held. 

■ NY State Police Forensic Investigation Center -- A 

state-of-the-art forensic facility that will serve the 
entire law enforcement community of the state of New 
York. The total cost of $25 million will be paid out 
of assets forfeited from drug traffickers under the 
asset forfeiture statutes. 

■ NY State Police Mobile Forensic Investigation Response 
Vehicle -- A motor home, valued at $100,000 forfeited 
from drug dealers, has been converted into a specially 
equipped forensic investigation response vehicle. It 



219 



will serve as an on-the-scene command post and mobile 
forensic office. 

■ Fayetteville, North Carolina -- The Fayetteville Police 
Department has one of the finest training facilities in 
the southeastern United States. It was financed 
entirely with funds acquired through asset forfeiture. 

Restitution 

I mentioned that forfeited property is often restored to 
victims. Indeed, the recovery of property and the return of that 
property to victims is one of the most important uses of the 
forfeiture laws. Let me give you a few examples of how we use 
the forfeiture laws to do that. 

• BCCI: In 1991, one of the largest scandals ever to hit the 
financial industry occurred when the Bank of Credit and 
Commerce International was found to have perpetrated a 
worldwide Ponzi scheme that resulted in the failure of banks 
and losses to depositors in 72 countries. Through the 
forfeiture laws, we have recovered nearly $800 million, 
virtually all of which has been, or will be, distributed to 
the victims of the fraud. -^ 

• Artemis: In N.Y. this month we seized a First Century Roman 
statue that was stolen some years ago from a convent in 
Italy and was shipped to the United States for sale through 
Sotheby's auction house. The statue was forfeited and will 
be returned to its owners in Italy. 

• Earlier this year, we remitted $103,980 to automobile 
insurance companies in Virginia that were defrauded in an 
insurance fraud case; we returned $84,118 to financial 
institutions in Texas that were defrauded in a credit card 
scheme; we restored $231,667 to a pension fund in 
Pennsylvania that was the victim of organized crime; and we 
paid $1.6 million to consumers who were the victims of a 
Pyramid scheme in Pennsylvania . 

A summary of the recent cases in which restitution was awarded to 
victims is attached to our testimony. These cases illustrate how 
the forfeiture laws have come to provide an indispensable tool 
for restoring to crime victims what they have lost through 
criminal activity. 



^ The BCCI money is being distributed through a Worldwide 
Victims Fund managed by court -appointed liquidators. In 
addition, forfeited funds will be used to reimburse the Federal 
Deposit Insurance Fund which suffered losses when one of the 
banks controlled by BCCI failed. 



220 



Tough but Fair 

As these statistics and examples illust]-ate, asset 
forfeiture has become an essential and effective law enforcement 
tool, but like any law enforcement tool it must have one 
essential component -- it must be fair: it must recognize the due 
process rights of all citizens and it must protect the rights of 
innocent property owners. We believe that any abuses of 
forfeiture can effectively be addressed by revision of forfeiture 
procedures, through legislation and internal policy. 

As I mentioned, the forfeiture laws evolved at a time when 
they were used primarily to forfeit things that had no legitimate 
purpose, like pirate ships, contraband goods and whisky stills. 
Over the years, the use and scope of forfeiture has greatly 
expanded, but it has never updated the procedures that govern 
them. In fact, the procedures that govern civil forfeitures 
today are the same as those that were devised decades ago for 
other purposes under the Admiralty Laws. It may be that those 
procedures were adequate when the object of the forfeiture was 
contraband or something else with no legitimate purpose, but when 
we move to the forfeiture of peoples' houses, cars, businesses 
and bank accounts, we need to ensure that the forfeiture is as 
fair as possible. 

I would like to call the Committee's attention to a 
comprehensive forfeiture reform bill that the Department of 
Justice has recently transmitted to the Speaker of the House. 
The bill contains a balanced set of proposals that, like H.R. 
1916, addresses the need to revise the forfeiture laws to protect 
the rights of Americans while at the same time taking into 
account the need to enhance the effectiveness of this valuable 
tool. It is the product of work over the past several years with 
the Treasury Department and state and local law enforcement 
agencies to produce a comprehensive set of revisions to the 
forfeiture laws that will ensure that when we apply the 
forfeiture laws in the modern context, our citizens are afforded 
appropriate procedural protections. Drafted by career 
prosecutors and agents at the Justice and Treasury Departments, 
the bill embodies all 13 of the principles of forfeiture reform 
that were endorsed earlier this year by the American Bar 
Association (ABA) , and it incorporates almost all of the 
provisions of H.R. 1916 in some form. 

Burden of Proof 

We think the burden of proof in a civil forfeiture case 
should be on the government, not on the property owner. The 
ancient allocation of the burden of proof, which is found in 
Section 615 of the Tariff Act of 1930 (19 U.S.C. § 1615), may 
make abundant sense under the Customs laws, but it is not 
appropriate when dealing with the kind of property the Department 



221 



of Justice forfeits under the modern forfeiture statutes. So we 
are proposing that in civil forfeiture cases the government be 
required to prove, by a preponderance of the evidence, that a 
crime was committed and that the property in question was derive^- 
from or used to commit that crime. 

We propose use the "preponderance of the evidence" standard. 
Preponderance of the evidence is the standard used in virtually 
all civil enforcement actions, including civil actions against 
money launderers (18 U.S.C. § 1956(b)), suits under the False 
Claims Act, and injunctions against on-going fraud (18 U.S.C. 
§ 1345) . The same standard should apply in civil forfeiture 
cases. Indeed, if the "clear and convincing standard" were 
applied, there would be cases where the government proved by a 
preponderance of the evidence that money was the proceeds of 
criminal activity, and yet it was returned to the criminal 
instead of being restored to the victims. 

Beyond that, we would make the shifting of the burden of 
proof part of a comprehensive procedural statute that lays out 
the manner in which a civil forfeiture case would be handled by 
the district court. There is no such statute today; instead, the 
procedures are governed by case law and miscellaneous provisions 
of the Customs laws and the Admiralty Rules. The comprehensive 
procedural statute would provide much needed clarity and 
simplicity to the forfeiture laws. 

Time 

The forfeiture statutes should be amended to give property 
owners ample time to file claims contesting the forfeiture of 
property. Everyone should be guaranteed his day in court; no one 
should be denied a hearing because the time for filing a claim 
was so short that by the time he received notice of the 
proceeding, the time to contest it had passed. 

Under current law, a claim contesting an administrative 
forfeiture must be filed not later than 20 days from the date of 
first publication of notice of forfeiture. See 19 U.S.C. § 1608. 
In contrast, the criminal forfeiture statutes give claimants 30 
days from the final date of publication of the notice of 
forfeiture to file a claim. See e.g. 18 U.S.C. § 1963(1) (2). 
This procedure represents a reasonable compromise between the 
property owner's interest in having a fair opportunity to file a 
claim in a forfeiture proceeding and the government's interest in 
expediting the forfeiture process and avoiding unnecessary 
storage and maintenance costs in the vast majority of forfeiture 
cases in which no claim is ever filed. Accordingly, we propose 
amending § 1608 to replace the 20-day rule with the 30-day rule 
that governs the filing of claims in criminal forfeiture cases. 
This goes beyond the provision in § 5 of H.R. 1916 which would 



35-668 96-8 



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give the claimant 30 days from the first publication of the 
notice . 

The time for filing a claim in a civil judicial forfeiture 
proceeding should be extended. Current law requires the claimant 
to file the claim within 10 days of the service of the arrest 
warrant in rem on the property. Because the claimant frequently 
has no notice of the arrest of the property, starting the 10-day 
period from the date of the arrest can impose a hardship. We 
would therefore amend Rule C of the Admiralty Rules to start the 
time period for filing a claim from the date of the receipt of 
actual notice of the arrest, or the last date of publication of 
the arrest pursuant to Rule C(4), whichever is earlier, and to 
extend the time from 10 days to 20 days. This provides greater 
protection than § 3 of H.R. 1916 which amends Rule C{6) to extend 
the period for filing a claim to 30 days from the date of the 
arrest of the property. 

Innocent Owners 

The interests of innocent owners should be protected. The 
Supreme Court held this Term that the Constitution does not 
prohibit the government from forfeiting the property of an 

innocent person. See Bennis v. Michigan , 116 S. Ct . , 1996 WL 

88269 (Mar. 4, 1996) . That case was correctly decided as a 
matter of constitutional law, but Congress, by statute, can 
provide more protection than the Constitution requires, and we 
think it should do so. 

Since 1984, Congress has included innocent owner provisions 
in the most commonly used civil forfeiture statutes. See 21 
U.S.C. § 881 (a) (4) , (6) , (7) ; 18 U.S. C. § 981(a)(2). Moreover, the 
Department of Justice, as a matter of policy, does not seek to 
forfeit property belonging to innocent owners. 

Nevertheless, the law in this area remains confused. The 
innocent owner provisions in the drug and money laundering 
statutes are inconsistent with each other, and many forfeiture 
statutes contain no innocent owner provision. For example, 
§ 881 (a) (4) (forfeiture of vehicles used to transport drugs), 
protects an owner whose property was used without his "knowledge, 
consent or willful blindness." Sections 881(a) (6) (drug 
proceeds) and 881(a) (7) (real property facilitating drug 
offenses) , on the other hand, contain no willful blindness 
requirement; they protect those who demonstrate lack of 
"knowledge or consent." And 18 U.S.C. § 981(a) (2) (property 
involved in money laundering) , requires only a showing of lack of 
"knowledge." The forfeiture statute for gambling offenses, 18 
U.S.C. § 1955(d), contains no innocent owner defense at all. 

The courts also differ as to what these defenses mean. The 
Ninth Circuit interprets "knowledge or consent" to mean that a 



223 



person must prove that he or she did not have knowledge of the 
criminal offense and did not consent to that offense. See United 
States V. One Parcel of Land , 902 F.2d 1443, 1445 (9th Cir. 1990) 
("knowledge" and "consent" are conjunctive terms, and claimant 
must prove lack of both) . Thus, in the Ninth Circuit, a wife who 
knows that her husband is using her property to commit a criminal 
offense cannot defeat the forfeiture of that property even if she 
did not consent to the illegal use. But the Second, Third and 
Eleventh Circuits hold that a person who has knowledge that his 
property is being used for an illegal purpose may nevertheless 
avoid forfeiture if he shows that he did not consent to that use 
of his property. See United States v. 141st Street Corp. . 911 
F.2d 870, 877-78 (2nd Cir. 1990) (landlord who knew building was 
being used for drug trafficking had opportunity to show he did 
not consent to such use), cert, denied . Ill S. Ct . 1017 (1991); 
United States v. Parcel of Real Property Known as 6109 Grubb 
Road . 886 F.2d 618, 626 (3rd Cir. 1989) (wife who knew of 
husband's use of residence for drug trafficking had opportunity 
to show she did not consent to such use) ; United States v. One 
Parcel of Real Estate at 1012 Germantown Road . 963 F.2d 1496 
(11th Cir. 1992) . 

The rule is entirely different for money laundering and bank 
fraud cases. Because § 981(a) (2) lacks a "consent" requirement 
and contains only a "lack of knowledge" requirement, there is no 
burden on the claimant to show that he or she took any steps at 
all to avoid the illegal activity. Lack of knowledge alone is 

sufficient. United States v. Real Property 874 Cartel Drive . 

F.3d , 1996 WL 125533 (9th Cir. Mar. 22, 1996) (per curiam) 

(because § 981(a) (2) does not contain a consent prong, "all 
reasonable steps" test does not apply) ; United States v. 
$705,270.00 in U.S. Currency . 820 F. Supp. 1398, 1402 (S.D. Fla. 
1993) ; United States v. Eleven Vehicles , 836 F. Supp. 1147, 1160 
n.l6 (E.D. Pa. 1993); but see United States v. All Monies , 754 F. 
Supp. 1467, 1478 (D. Haw. 1991) (claimant must prove "that he did 
not know of the illegal activity, did not willfully blind himself 
from the illegal activity, and did all that reasonably could be 
expected to prevent the illegal use" of his property) ; United 
States v. All Funds Presently on Deposit at American Express 
Bank , 832 F. Supp. 542 (E.D.N.Y. 1993) (same) . 

The courts are also divided with respect to the application 
of the innocent owner defense to property acquired after the 
crime giving rise to the forfeiture occurred. In the Eleventh 
Circuit, a person who acquires property knowing that it was used 
to commit an illegal act is not an innocent owner. United States 
v. One Parcel of Real Estate Located at 6640 SW 48th Street , 41 
F.3d 1448 (11th Cir. 1995) (lawyer who acquires interest in 
forfeitable property as his fee is not an innocent owner) . But 
in the Third Circuit, the rule is the opposite: a person who 
knowingly acquires forfeitable property is considered an innocent 
owner because he could not have consented to the illegal use of 

8 



224 



the property before he owned it. See United States v. One 1973 
Rolls Rovce . 43 F.3d 794 (3d Cir. 1994). 

In the Rolls Royce case, the court said that- if its decision 
left the innocent owner statute in "a mess," the problem 
"originated in Congress when it failed to draft a statute that 
takes into account the substantial differences between those 
owners who own the property during the improper use and some of 
those who acquire it afterwards." The court concluded, "Congress 
should redraft the statute if it desires a different result." 43 
F.3d at 820. 

In United States v. A Parcel of Land (92 Buena Vista Ave.) , 
113 S. Ct. 1126 (1993), the Supreme Court identified another 
loophole in the statute as it applies to persons who acquire the 
property after it is used to commit an illegal act. Because, 
unlilce its criminal forfeiture counterpart, 21 U.S.C. 
§ 853 (n) (6) (B) , the civil statute does not limit the innocent 
owner defense to persons who purchase the property in good faith, 
it applies to innocent donees. Justice Kennedy, in a dissenting 
opinion, noted that this allows drug dealers to shield their 
property from forfeiture through transfers to relatives or other 
innocent persons. The ruling. Justice Kennedy said, "rips out 
the most effective enforcement provisions in all of the drug 
forfeiture laws," 113 S. Ct . at 1146, and "leaves the forfeiture 
scheme that is the centerpiece of the Nation's drug enforcement 
laws in quite a mess." 113 S. Ct . at 1145 (Kennedy, J. 
dissenting) . Justice Stevens, however, writing for the 
plurality, said that the Court was bound by the statutory 
language enacted by Congress. "That a statutory provision 
contains 'puzzling' language, or seems unwise, is not an 
appropriate reason for simply ignoring the text." 113 S. Ct . at 
1135, n.20. 

Finally, there is widespread confusion among the courts with 
respect to the standard that should be used to determine if a 
person had "l^nowledge" of or "consented" to the illegal use of 
his or her property. Some courts equate "knowledge" with 
"willful blindness" so that a person who willfully blinds himself 
to the illegal use of his property is considered to have had 
knowledge of the illegal act. See Rolls Rovce . supra . But other 
courts allow a person to show lack of knowledge by showing a lack 
of actual knowledge. See United States v. Lots 12. 13. 14 and 
15, 869 F.2d 942, 946-47 {6th Cir. 1989). Most courts focus on 
the "consent" prong of, the defense, and hold that the property 
owner must "take every reasonable step, and do all that 
reasonably can be done, to prevent the illegal activity" in order 
to be considered an innocent owner. See United States v. 141st 
Street Corp. , 911 F.2d 870 (2d Cir. 1990); United States v. One 
Parcel of Real Estate at 1012 Germantown Road . 963 F.2d 1496 
(11th Cir. 1992); United States v. One Parcel of Property (755 
Forest Road) . 985 F.2d 70 (2d Cir. 1993); United States v. 5.382 



225 



Acres . 871 F. Supp . 880 (W.D. Va . 1994) ("Property owners are re- 
quired to meet a significant burden in proving lack of consent 
for they must remain accountable f c r the use of their property: 
Unless an owner with knowledge can prove every action, reasonable 
under the circumstances, was taken to curtail drug- related 
activity, consent is inferred and the property is subject to 
forfeiture . " ) . 

To remedy the inconsistencies in the statutes, and to ensure 
that innocent owners are protected under all forfeiture statutes 
in the federal criminal code, we propose a Uniform Innocent Owner 
Defense to be codified at 18 U.S.C. § 983.^ It applies to all 
civil forfeitures in titles 8, 18 and 21 and it may be 
incorporated into other forfeiture statutes as Congress may see 
fit. Thus, there will no longer be civil forfeiture provisions 
lacking statutory protection for innocent owners. 

We would separately deal with property owned at the time of 
the illegal offense, and property acquired afterward. In the 
first category, property owners will be able to defeat forfeiture 
by showing either 1) that they lacked knowledge of the offense, 
or 2) that upon learning of the illegal use of the property, they 
"did all that reasonably could be expected to terminate such use 
of the property." Thus, as the majority of courts now hold, 
under the second defense a spouse could defeat forfeiture of her 
property, even if she knew that it was being used illegally, by 
showing that she did everything that a reasonable person in her 
circumstances would have done to prevent the illegal use. (This 
provision is included in § 8 of H.R. 1916, but only for drug 
forfeitures . ) 

Under the first defense, a showing of a lack of knowledge 
would be a complete defense to forfeiture. But to show lack of 
knowledge, the owner would have to show that he was not willfully 
blind to the illegal use of the property. This means that if the 
government establishes the existence of facts and circumstances 
that should have created a reasonable suspicion that the property 
was being or would be used for an illegal purpose, the owner 
would have to show that he did all that reasonably could be 
expected in light of such circumstances to prevent the illegal 
use of the property. See United States v. Property Titled in the 
Names of Ponce . 751 F. Supp. 1436, 1440 n.3 (D. Haw. 1990) 
(claimant must show that he did not consent in advance to illegal 



For a detailed discussion of all of these issues, and a 
legislative proposal similar to the one in this bill, see Franze, 
"Note: Casualties of War?: Drugs, Civil Forfeiture, and the 
Plight of the 'Innocent Owner, '" The Notre Dame Law Review, Vol. 
70, Issue 2 (1994) 369-413. See also Cassella, "Forfeiture 
Reform: A View from the Justice Department," Journal of 
Legislation, Notre Dame Law School, 21:2 (1995). 

10 



226 



use of his property even if he proves that he did not actually 
know whether such illegal use ever occurred) . 

We propose a different formulation of the innocent owner 
defense in cases involving property acquired after the offense 
giving rise to the forfeiture. This is necessarily so, because 
in such cases, the critical issue concerns what the property 
owner knew or should have known at the time he acquired the 
property, not what he knew when the crime occurred. 6640 SW 48th 
Street , supra . So, in the case of after-acquired property, a 
person would be considered an innocent owner if he establishes 
that he acquired the property as a bona fide purchaser for value 
who at the time of the purchase did not know and was reasonably 
without cause to believe that the property was subject to 
forfeiture. This means that a purchaser is an innocent owner if 
in light of the circumstances surrounding the purchase he did all 
that a person would be expected to do to ensure that he was not 
acquiring property that was subject to forfeiture. 

This provision will be of particular importance is cases 
involving the acquisition of drug dollars on the black market in 
South America. In such cases, wealthy persons assist in the 
laundering of the drug money by purchasing U.S. dollars, or 
dollar-denominated instruments and sending the money to the 
United States while maintaining ignorance of its source. See 
United States v. All Monies , 754 F. Supp. 1467 (D. Haw. 1991); 
United States v. Funds Seized From Account Number 20548408 at 
Bavbank, N.A. , 1995 WL 381659 (D. Mass. Jun. 16, 1995). The new 
statute would put the burden on such individuals to show that 
they took all reasonable steps to ensure that they were not 
acquiring drug proceeds . 

Limiting the innocent owner defense to "purchasers" in this 
circumstance tracks the language of the criminal innocent owner 
defense, 21 U.S.C. § 853 (n) (6) (B) , and eliminates the problem 
identified by Justice Kennedy in 92 Buena Vista . 

We also see the need to address a number of other concerns 
that have arisen in the courts under the current law. First, we 
would makes clear that under no circumstances may a person other 
than a bona fide purchaser be considered an innocent owner of 
criminal proceeds. This avoids a situation that arises in 
community property states when a spouse claims title to her 
husband's drug proceeds as marital property. 

We would also define "owner" to include lienholders and 
others with secured interests in the subject property, but to 
exclude, consistent with the prevailing view under current law, 
general creditors, bailees, nominees and beneficiaries of 
constructive trusts. See e.g. United States v. One 1990 
Chevrolet Corvette . 37 F.3d 421 (8th Cir. 1994) (titled owner 
lacks standing to contest forfeiture of property over which she 

11 



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exercised no dominion or control) ; United States v. BCCI Holdings 
(Luxembourg) S.A. , 46 F.3d 1185 (D.C. Cir. 1995) (general 
creditors and beneficiaries of constructive trusts lack 
sufficient interest in the property to contest forfeiture) ; 
United States v. $3,000 in Cash , 906 F. Supp. 1061 (E.D. Va . 
1995) (person who voluntarily transfers his property to another 
is no longer the "owner" and therefore lacks standing to contest 
the forfeiture) . 

We propose to resolve a split in the courts regarding the 
disposition of property jointly owned by a guilty person and an 
innocent spouse, business partner or co-tenant. The district 
court would be given three alternatives: sever the property; 
liquidate the property and order the return a portion of the 
proceeds to the innocent party; or allow the innocent party to 
remain in possession of the property, subject to a lien in favor 
of the government to the extent of the guilty party's interest. 

Finally, we propose a rebuttable presumption relating to 
innocent owner defenses raised by financial institutions that 
hold liens, mortgages or other secured interests in forfeitable 
property. Representatives of the financial community suggested 
that there be a presumption that the institution acted reasonably 
in acquiring a property interest, or in attempting to curtail the 
illegal use of property in which it already held an interest, if 
the institution establishes that it acted in accordance with 
rigorous internal standards adopted to ensure the exercise of due 
diligence in making loans and acquiring property interests, and 
did not have actual notice that the property was subject to 
forfeiture before acquiring its interest. The government could 
rebut the presumption by establishing the existence of facts and 
circumstances that should have put the institution on notice that 
its ordinary procedures were inadequate. 

Other Protections for Property Owners 

Property owners should be protected in still other ways. We 
agree with § 2 of H.R. 1916 that the Federal Tort Claims Act, 28 
U.S.C. § 2860(c), should be amended to allow property owners to 
recover damages to their property caused by the negligence of 
government agents. We also would allow claimants to seek a stay 
of civil forfeiture cases to avoid having to choose between 
waiving their 5th Amendment right against self-incrimination in a 
related criminal case and failing to testify in defense of a 
civil forfeiture action. And we would create a statutory right 
to a pre-trial hearing on whether seized or restrained property 
could be used to pay attorneys fees in a criminal case. 

We would also require that all forfeitures of real property 
proceed judicially; that there be a judicial proceeding to 
determine if the notice given of an administrative forfeiture 
afforded the property owner sufficient due process; that the 

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government pay pre- and post- judgment interest tc successful 
claimants; and that all seizures be pursuant tc a warrant except 
where exceptions to the Fourth Amendment wan int requirement 
apply. In all of these ways, we would provide greater protection 
for property owners. 

The Cost Bond Recmirement 

The "cost bond" should be waived in in forma pauperis cases 
and in any other category of cases where it is determined to be 
unnecessary to protect the government against the storage and 
maintenance expenses that accrue when the government is forced to 
litigate frivolous claims. In the past fiscal year, agencies of 
the Department of Justice effected over 30,000 seizures in 
forfeiture cases, approximately 80 percent of which were 
unopposed. If the cost bond were completely eliminated, we fear 
that the federal courts could be inundated with frivolous claims. 
As long as the cost bond is not required in cases where it would 
cause a financial hardship, it should be preserved as a 
disincentive to the filing of such claims and as insurance that 
the government's storage and maintenance costs will not negate 
the value of the forfeiture. 

Use of Property Pending Forfeiture Proceedings 

The seizure of property derived from or used to commit a 
criminal offense is often necessary to prevent its use in future 
criminal activity. It may cause a hardship for a person who uses 
his truck to transport drugs to do without the truck, if he also 
uses it to get to work, but the alternative is to allow drug 
dealers the unfettered use of their property for months or years 
while forfeiture proceedings wind their way through the courts. 
Thus, we believe that the government should not be required to 
return seized property to a claimant, pending forfeiture, if the 
claimant established that the deprivation of the property caused 
him a hardship. 

Moreover, criminals have a poor track record when it comes 
to preserving property in top condition so that the government 
can recover its full value when it is ultimately forfeited. The 
fact is that in the overwhelming majority of cases, property 
seized from criminals would disappear or be destroyed long before 
any forfeiture action became final. 

We recognize the importance of avoiding hardship to innocent 
property owners. For this reason, we require approval by the 
Department of Justice before any business is restrained or 
forfeited. Moreover, we currently require that all forfeitures 
of real property, including business property, be handled 
judicially, not administratively. Beyond that, we propose 
allowing a property owner to post substitute property in order to 
recover the use of his seized property pending trial. We believe 

13 



229 



that these alternatives protect the interests of law enforcement 
while ensuring fairness. 

Legal Expenses for Claimants 

If a property owner successfully challenges a forfeiture 
action, he may be eligible to recover his legal expenses under 
the Equal Access to Justice Act (EAJA) . See , e.g. , United States 
V. Douglas . 55 F.3d 584 (11th Cir. 1995). We believe this 
current law provides an appropriate remedy. 

Money deposited into the Assets Forfeiture Fund should not 
be used to pay the cost of appointed counsel in civil forfeiture 
cases. This would place an enormous financial burden on the 
Forfeiture Fund. If a significant number of claimants in the 
30,000 cases per year investigated by the Justice law enforcement 
agencies that resulted in seizures filed claims and sought court- 
appointed counsel, there would be little money left to apply to 
law enforcement purposes. That is especially so since in civil 
in rem forfeitures, in contrast to criminal cases, there is often 
more than one person whose property rights are affected, and thus 
there will often be more than one person asserting a right to 
court-appointed counsel. And it would be even worse if the 
disincentive to filing frivolous claims that is provided by the 
cost bond requirement were removed. 

Proposals Specifically Designed to Benefit Law Enforcement 

It is important to ensure that the forfeiture laws operate 
fairly, that they guarantee all citizens access to the courts and 
that they protect the rights of innocent owners. But it is 
equally important that the laws operate effectively; that 
criminals are now allowed to exploit loopholes and ambiguities in 
the law to immunize their property from forfeiture. There must 
be a balance in forfeiture legislation. 

Proceeds of Crime 

With respect to our ability to confiscate the proceeds of 
crime, the forfeiture laws are very much a "hit or miss" 
proposition. We can forfeit the proceeds of bank fraud, but not 
the proceeds of consumer fraud; we can forfeit the vessel used to 
smuggle illegal aliens, but not the money paid to the smuggler; 
we can forfeit proceeds in a drug case, but not money paid to a 
"hit man" in a murder- for-hire case, or to a terrorist, or to a 
corrupt public official. As the ABA recognized in its 13 
principles of forfeiture reform, no one should have the right to 
retain the proceeds of crime. Thus, like the ABA, we propose 
that proceeds of all federal crimes enforced by the Department of 
Justice be subject to forfeiture. 



14 



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Also, the law must be clear as to what "proceeds" means. I- 
must make clear that it means "gross proceeds," no- net profit. 
Last month, a federal judge i. Chicago held that when we forfeit 
drug money from a heroin dealer, we must give the dealer credit 
for the cost of the heroin. United States v. McCarroll . 1996 
U.S. Dist. LEXIS 8975 (N.D. 111. 1996). That is wrong. Drug 
dealers and other criminals should not be allowed to deduct the 
cost of doing business. 

International Crimes 

The forfeiture laws also need to be strengthened to enable 
us to deal more effectively with crimes and criminals who do not 
respect international borders. A fugitive who refuses to appear 
in court to answer criminal charges should not have access to the 
same court to oppose the forfeiture of property used to commit 
the same offense. In the past, we have relied on a judge-made 
rule, the "fugitive disentitlement doctrine," to bar fugitives 
from hiding behind their fugitive status while contesting the 
civil forfeiture of their property. This Term, the Supreme Court 
said such a rule cannot be created by judges; it is up to 
Congress to pass legislation to this effect. Degen v. United 

States . S. Ct. , 1996 WL 305720 (1996) . Therefore, we 

have included a codification of the fugitive disentitlement 
doctrine in our bill. 

When a person is arrested abroad, there must be a procedure 
for immediately freezing his assets in the United States to 
prevent them from being moved electronically overseas. Persons 
arrested in the United States should not be able to conceal their 
ill-gotten gains behind bank secrecy laws in foreign 
jurisdictions. Courts should be authorized to compel criminal 
defendants to repatriate their property so that it can be used to 
compensate victims, and they should be made to turn over records 
of financial transactions that would lead to the discovery of 
their assets. By enacting our proposals in all of these areas. 
Congress can do much to strengthen our ability combat 
international economic crime. 

Criminal Forfeiture 

The law should also make it easier for the government to use 
criminal forfeiture when it is appropriate to do so. Congress 
has enacted 8 criminal forfeiture statutes and 156 civil 
forfeiture statutes . Thus, in well over 100 cases, civil 
forfeiture is the only available remedy. As I mentioned, 
criminal forfeiture often isn't a viable option because it is 
limited to the property of the defendant that was involved in the 
particular offense for which the defendant was convicted. But in 
those instances where the property belongs to a criminal who is 
being prosecuted, and the property was involved in the offense on 
which the prosecution is based, the remedy of criminal forfeiture 

15 



231 



should be available. Accordingly, we have proposed that for 
every offense for which civil forfeiture is authorized, 
prosecutors should be able to do a criminal forfei :ure instead, 
if the facts of the case permit. 

Moreover, the procedures governing criminal forfeiture need 
to be revised to remove loopholes and ambiguities. For example, 
on light of the Supreme Court's recent decision in Libretti v. 

United States , U.S. , 116 S. Ct . 356 (1995), which held 

that criminal forfeiture is part of the defendant's sentence, not 
a substantive element of the offense, it is clear that the burden 
of proof for criminal forfeiture is preponderance of the 
evidence. All but one of the federal appellate courts that have 
addressed the issue have so held. See United States v. Mvers . 21 

F.3d 826 (8th Cir. 1994); United States v. Voiaht , F.3d , 

1996 WL 380609 (3rd Cir. Jul. 9, 1996); United States v. Smith . 
966 F.2d 1045, 1050-53 (6th Cir. 1992); United States v. Bieri , 
21 F.3d 819 (8th Cir. 1994); United States v. Elcersma , 971 F.2d 
690 (11th Cir. 1992); United States v. Ben-Hur . 20 F.3d 313 (7th 
Cir. 1994); United States v. Tanner . 61 F.3d 231 (4th Cir. 1995); 
United States v. Herrero . 893 F.2d 1512, 1541-42 (7th Cir.), 
cert, denied . 110 S. Ct . 2623 (1990); United States v. Hernandez- 
Escarseqa . 886 F.2d 1560, 1576-77 (9th Cir. 1989), cert, denied , 
110 S. Ct. 3237 (1990); United States v. Sandini . 816 F.2d 869, 
875-76 (3d Cir. 1987); but see United States v. Pelullo . 14 F.3d 
881 (3rd Cir. 1994) (applying the reasonable doubt standard for 
RICO cases only) . The majority rule should be codified to end 
needless litigation over this issue. 

Also, the criminal forfeiture statutes should also be 
revised to permit the pre-trial restraint of substitute assets. 
In the absence of such authority, criminals who are put on notice 
by an indictment that the government will seek to forfeit 
substitute property are currently free to dispose of that 
property at any time before the conclusion of the criminal case. 

Victims 

Finally, as I mentioned earlier, the forfeiture statutes 
need to be amended to improve our ability to use forfeiture to 
restore property to victims. Right now, if a forfeiture occurs 
under a criminal forfeiture statute, the property can be restored 
to the victims. The same is true for most civil forfeiture 
statutes enforced by the Treasury Department . But in cases 
involving civil forfeiture statutes enforced by the Department of 
Justice, property forfeited civilly cannot be returned to 
victims. This is simply an anomaly in the law that relates once 
again to the fact that civil forfeitures originally applied only 
to victimless crimes. This problem can be easily fixed and 
should be fixed without delay. 



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Conclusion 



In these ways, the current asset forfeiture laws car. be 
greatly improved. The Department of Justice is committed to 
ensuring that the forfeiture laws of the United States will be 
tough but fair, which is exactly what the American people have 
right to expect . 



17 



233 



SIGNIFICANT CASES IN WHICH RESTITUTION OF FORFEITED PROPERTY 
WAS AWARDED TO VICTIMS BY THE DEPARTMENT OF JUSTICE 

• Petition for remission of property forfeited in United 
States V. James Messera and Ron Miceli (Southern District of 
New York) : 

The Mason Tenders District Council Pension Fund --a pension 
fund for union laborers performing a wide variety of 
construction-related jobs -- was a victim of the racketeering 
activities of Ronald Miceli and his co-conspirators, members of 
the Genovese organized crime family. The racketeers fraudulently 
induced the Pension Fund to purchase real property at inflated 
prices and converted Pension Fund assets to their personal use, 
resulting in losses to the Pension Fund of approximately $40 
million. Property worth $231,667.31 was forfeited by defendant 
Miceli pursuant to the Racketeer Influenced and Corrupt 
Organizations Act, 18 U.S.C. § 1963. In May 1996, the full 
amount forfeited was restored to the pension fund. 

• Petitions for remission of forfeited property by 11,516 
individual petitioners in United States v. Frederick Taft 
and Jonathan Gregory Giagnocavo (Eastern District of 
Pennsylvania) : 

Between June 1991 and February 1992, defendants Taft and 
Giagnocavo operated a pyramid scheme called the Washington Power 
Digest (WPD) . Through this scheme, the defendants solicited 
approximately 26,000 subscriptions to a quarterly financial 
newsletter falsely claimed to have been written by 26 Washington, 
D.C., attorneys. In return for a $125 subscription fee, the 
defendants represented that subscribers could earn substantial 
sums from WPD ' s sharing plan. Although the defendants made small 
payouts to some subscribers in order to give the scheme an air of 
credibility, the sizeable awards promised were never issued. 
Indeed, the defendants never intended to pay subscribers the vast 
sums advertised. In October 1992, the defendants agreed to the 
forfeiture of $1,636,129.97 pursuant to 18 U.S.C. § 982. On July 
13, 1996, the Department of Justice authorized the distribution 
of this amount to 11,516 petitioners, compensating them for their 
total claimed losses, approximately $10 to $125 each. 

• Petition for remission of forfeited property in United 
States V. $2.004,013.18; $117 . 045 . 89 ; $553.808.87 (Southern 
District of Ohio) : 

Petitioner, the United States Defense Security Assistance 
Agency (DSAA) , administers the Foreign Military Financing 
Program, which provides financial assistance to selected foreign 

18 



234 



countries for the purchase of military equipment. The State of 
Israel, which receives assistance under this program, was 
defrauded of approximately $11 million as a result of a sch me to 
divert payments made by the Israeli Air Force under a defense 
contract. DSAA provided reimbursements to Israel for the 
diverted payments and therefore was a victim of the offense. The 
United States seized and forfeited $2,674,868 in currency from 
three Swiss bank accounts pursuant to 18 U.S.C. § 981. In March 
1994, the Department of Justice authorized the distribution of 
$2,674,868 in forfeited currency to DSAA. 

• Petition for remission of property forfeited in United 
States V. James Larkin Toler (Northern District of Texas) : 

Empire Savings and Loan (Empire) was fraudulently induced to 
lend in excess of $250 million in connection with a condominium 
development plan. Empire suffered losses of approximately $142 
million as a result of the defendant's fraud, which contributed 
to Empire' eventual failure. Petitioner, the Federal Deposit 
Insurance Corporation (FDIC) , in its capacity as the statutory 
manager of the Federal Savings and Loan Insurance Corporation, 
and as receiver of Empire, became subrogated to Empire's right to 
receive restitution from the defendant as a victim of fraud. The 
United States seized and forfeited $2,300,000 from the defendant 
pursuant to 18 U.S.C. § 1963. On June 19, 1996, the Department 
of Justice granted FDIC's petition seeking the forfeited 
$2,300,000 in currency. 

• 1300 petitions for remission of property forfeited in 
United States v. 2171-2173 Bennett Road (Eastern District of 
Pennsylvania) : 

Petitioners were 1,300 victims of a consumer fraud scheme in 
which numerous roofing companies provided customers with 
"lowball" estimates on roofing work. After the roofing work 
began, the on-site foreman told customers that their roofs were 
worse than originally believed and more expensive repairs were 
reauired. Currency in the amount of $745,034.74 was forfeited 
under 18 U.S.C. §§ 981(a)(1)(A) and (C) . On September 8, 1994, 
the Department of Justice authorized the distribution of the full 
$745,034.74 in forfeited currency to the 1,300 victims pursuant 
to 18 U.S.C. § 981 (e) (6) . 

• Petition for remission of property forfeited in U.S . v. 
Tzyv-Bin-Chen (Southern District of New York) : 

The petitioner. Republic Bank of California, N.A. 
(Republic) , was defrauded of approximately $13 million pursuant 
to a loan fraud scheme. The defendant obtained the loans from 

- 19 - 



235 



Republic by falsely representing that the gold coins he was 
pledging as collateral were authentic but, in fact, they were 
counterfeit and go^-d-plated. Pursuant to 18 U.S. C. § 982, the 
United States seized and forfeited numerous assets from the 
defendant, valued at $565,424.38. On May 13, 1996, the 
Department of Justice authorized the distribution to Republic of 
the net proceeds of sale of some of the forfeited property, 
amounting to $266,013.19, and the remission of other assets worth 
$274,624.74. Furthermore, on March 30, 1992, Republic recovered 
an additional $34,818.75 through an administrative petition for 
remission filed with the Federal Bureau of Investigation. 

• Petition for remission of property forfeited in United 
States V. Muhammed Ashraf Hussain,- United States v. Atiq 
Hossain Kahn (Eastern District of Virginia) : 

Seven insurance companies were defrauded of $200,544.07 as 
the result of an automobile insurance fraud scheme. The 
government successfully forfeited two bank accounts owned by the 
defendants containing a total of $103,980.24. On May 2, 1996, 
the Department of Justice remitted this amount to the 
petitioners. 

• Petitions filed in connection with United States v. $112,000 
in United States Currency (Southern District of Texas) : 

Five financial institutions were defrauded of approximately 
$84,000 pursuant to a credit card fraud scheme. Under 18 U.S.C. 
§ 981(a) (1) (C) , the government forfeited $112,000 from bank 
accounts controlled by the perpetrator of the scheme. On June 3, 
1996, the Department of Justice returned $84,118.85 to the 
petitioners, representing the petitioners' total losses from the 
scheme . 



• Petition for remission of proceeds of sale of forfeited 

property in United States v. Cheeseman (Northern District of 
New York) : 

Petitioner, Key Bank of New York, was the victim of an 
extortion scheme executed by a former employee. The forfeited 
property consisted of the assets contained in the defendant's 
pension plan and certain shares of stock, all of which were 
forfeited pursuant to 18 U.S.C. § 982. On January 30, 1996, the 
Department of Justice returned $136,488.68 to Key Bank, 
representing the full net proceeds derived from the sale of the 
forfeited property. 



- 20 



236 



• Petition for remission of forfeited currency in United 
States V. Strissel (District of Maryland) : 

Petitioner, the Annapolis Housing Authority (AHA) , was 
defrauded of an estimated loss amounting to hundreds of thousands 
of dollars through the defendant's bribery and racketeering 
activities. In its amended petition, AHA claimed an interest in 
$78,000 of the $157,000 in currency forfeited by the defendant in 
this case. The currency was forfeited under 18 U.S. C. § 1963. 
Pursuant to 18 U.S.C. § 1963(g) (1), the Department of Justice on 
April 22, 1996, authorized the return of the requested $78,000 to 
AHA. 



• Petition for remission of property forfeited in United 
States V. Andrzei Smolinslci (District of New Jersey) : 

Bank Polska, a corporation wholly owned by the government of 
Poland, was defrauded of $2,000,000 through a money laundering 
and bank fraud conspiracy. Pursuant to 18 U.S.C. § 982(a), the 
United States criminally forfeited $1,161,344.40 from two bank 
accounts controlled by the conspirators. On April 12, 1996, the 
Department of Justice granted remission of the full amount of the 
forfeited currency pursuant to 18 U.S.C. § 982. 

• Petition for remission of property forfeited in United 
States V. Stone (Western District of Virginia) : 

Petitioner, the United States Services Automobile 
Association (USAA) , was defrauded of approximately $61,100 
through the payment of a fraudulent insurance claim. The United 
States seized and forfeited $15,649 in currency under 18 U.S.C. 
§ 982. On June 14, 1994, the Department of Justice distributed 
the $15,302.50 to USAA. 

• Petition for remission of proceeds of sale of real property 
forfeited in United States v. 23 58 Payne Avenue. Wichita. 
Kansas (Eastern JDistrict of Virginia) : 

PRC, Inc. (PRC) , was the victim of an extortion scheme 
perpetrated by one of its employees from which it lost a total of 
$448,934.81. The above -captioned real property was forfeited 
from the defendant under 18 U.S.C. § 982. PRC requested 
remission of the proceeds from the sale of the forfeited real 
property. On November 16, 1995, the Department of Justice 
returned to PRC the full amount of the net proceeds obtained from 
the sale of the forfeited real property, which amounted to 
$13,654.37. 



21 - 



237 

Mr. Hyde. Ms. Blanton. 

STATEMENT OF JAN P. BLANTON, DIRECTOR, EXECUTIVE OF- 
FICE FOR ASSET FORFEITURE, DEPARTMENT OF THE 
TREASURY 

Ms. Blanton. Good morning, Mr. Chairman. 

I am Jan Blanton, the Director of the Department of Treasury's 
Executive Office for Asset Forfeiture. 

I am pleased to appear before you today to offer our perspective 
on H.R. 1916 and the changes it would bring about in Federal for- 
feiture. Civil forfeiture has been an authority of Treasury law en- 
forcement that dates back to the very founding of our Republic. 

In the last dozen years, however, the Congress has developed 
and expanded forfeiture to enable all of Federal law enforcement 
to address the varied manifestations of sophisticated, modern and 
financially profitable crime. While allowing us to go afler the pro- 
ceeds and instrumentalities of crime, our use of asset forfeiture has 
now evolved to the point where it strikes at the very core of crimi- 
nal organizations and has become an essential part of our overall 
enforcement strategy. 

The attractiveness of asset forfeiture and a reason for its growth 
in the United States is very simple: it takes the profit out of crime. 
Asset forfeiture is a program that cuts to the heart of most crimi- 
nal activity, dismantling criminal syndicates in a way that simple 
incarceration never could. 

By relentlessly focusing on the profitability of crime, it is an en- 
forcement tool that keeps pace with evermore well-financed and 
internationalized criminal groups. It is an enforcement tool with 
notable interrelated benefits. It pavs for its own property manage- 
ment costs and relieves additional burdens that otherwise would 
fall to our law-abiding citizens and taxpayers. It strengthens law 
enforcement by rechanneling forfeited value back into this most 
fundamental societal purpose, to promote cooperation among Fed- 
eral, State and local police around the country through our ability 
to equitably share forfeited assets with those who have assisted in 
our investigations. It allows for victim restitution by permitting us 
to return the forfeited assets of criminals to those who were once 
their prey. 

Under the Weed and Seed Program, it turns tainted properties 
back to constructive community use. It even sanctions the donation 
of forfeited assets to charitable organizations and the transfer of 
forfeited monies to support our national effort to reduce the de- 
mand for illegal drugs. 

In just a very few specific examples, the canine and handler 
teams detecting firearms and explosives for the Bureau of Alcohol, 
Tobacco and Firearms, the enhanced security presence at this sum- 
mer's Olympic games in Atlanta, and the antidrug and violence 
presentations to elementary school children by police officers in 
California's Orange County would not be as far along as they are 
were it not for support of the Federal forfeiture programs. 

We have arrived at this point through a reflective and measured 
expansion of forfeiture authorities always guided by the fundamen- 
tal belief that the strength of Federal forfeiture rests directly upon 
public confidence in the program's integrity. 



238 

While we appreciate the intent of H.R. 1916 to safeguard that in- 
tegrity, we have significant reservations about how this bill would 
adversely impact today's Federal forfeiture authorities. The prin- 
cipal provisions of H.R. 1916 would amend several sections of the 
Tariff Act of 1930, codified in title 19, U.S.C., to place the burden 
of proof on the United States in a civil forfeiture action, raise the 
standard of proof from probable cause to clear and convincing in a 
civil forfeiture action, eliminate the need to file a cost bond to have 
a claim of interest in property determined in a civil judicial pro- 
ceeding, provide for appointment of counsel in a civil forfeiture ac- 
tion when a claimant cannot afford that representation, provide for 
the release of seized property prior to forfeiture if the seizure 
causes substantial hardship on a claimant, and provide for a cause 
of action to require the release of property pending the completion 
of the forfeiture proceeding. 

In addition, H.R. 1916 would amend title 18 to provide for the 
Department of Justice to pay for the compensation awarded by the 
courts for representation of claimants. 

Collectively these provisions of H.R. 1916 present three problems 
that detract significantly from the bill's intended reform purposes. 
First, title 19 is a commercial statute designed to facilitate trade, 
expedite the collections of fines, penalties and import duties, pro- 
hibit the introduction of contraband items into the United States, 
protect intellectual property rights, as well as the public health and 
safety. 

The changes proposed by H.R. 1916 would compromise the abil- 
ity of the U.S. Customs Service to fulfill these vital responsibilities. 
Think about the message that the United States would be sending 
to its trading partners if at our borders Customs officials could no 
longer seize and retain the sizable quantities of pirated products 
stolen from the inventiveness and creativity of American workers. 
Indeed, in those instances where the detention of property serves 
as an appropriate substitute for a lien, the ability of the Secretary 
of the Treasury to collect Customs revenues could be impaired. 

Second, it is our belief that H.R. 1916 would greatly increase the 
number of cases on an already crowded docket of the Federal 
courts. Waiver of the cost bond coupled with the appointment and 
compensation of counsel could serve to encourage litigation of even 
the most plainly forfeitable property interests. 

Third, H.R. 1916 will make it more difficult for the United States 
to deprive criminal violators of their ill-gotten proceeds. Generally, 
it will make it more difficult to detain property at the border. Re- 
leasing property pending completion of forfeiture appears contrary 
to the very aims of current forfeiture law. 

As drafted, the provisions of H.R. 1916 may have a substantial 
impact on the Federal Government's ability to detain dangerous 
food products, adulterated or unlicensed drugs, child pornography, 
illegal firearms and unsafe computer products at the border. It 
would compromise our ability to protect intellectual property rights 
and endanger a portion of Customs revenues. 

Finally, Federal court caseloads and law enforcement's ability to 
deprive individuals of the proceeds of their illegal activity would be 
impacted significantly. 



239 

We value the recent progress that the Congress and law enforce- 
ment have made in the last 12 years in the application of forfeiture 
authorities. We share the concerns of our colleague at the Depart- 
ment of Justice and of you, Mr. Chairman, that forfeiture law can 
and should be further refined to better ensure its recognition of 
basic protections accorded property rights. 

We believe, however, that H.R. 1916 is wide off that mark in 
achieving the appropriate balance between individual property 
rights and the enforcement of our civil and criminal forfeiture stat- 
utes. Alternatively we commend for your consideration the bill pre- 
sented by the administration last week, the provisions of which 
have just been highlighted by my associate at the Department of 
Justice, and most importantly, achieves the requisite balance. 

We have worked closely in the crafting of the administration's 
bill and it contains several sections that broaden and enhance 
Treasury law enforcement authorities by supporting a common goal 
of better protecting rights and property. Perhaps because of this 
imposing power, a power not simply to incarcerate criminals but to 
take down their organizations, forfeiture today is all too often the 
subject of negative media coverage. 

Where Federal forfeiture is involved, we accept the challenge to 
right the wrongs that may be done, but such incidents should not 
obscure the many positive aspects of this formidable law enforce- 
ment mechanism. 

The Department of Treasury had been entrusted with significant 
forfeiture authority for over 200 years. We have exercised this au- 
thority in the pursuit of various illegal activities that threaten the 
safety, security and prosperity of the American people. Forfeiture 
is a legitimate authority bestowed by the citizens of the United 
States upon Federal law enforcement. Our obligation then and now 
is to make proper use of it so that we may realize its most fun- 
damental purpose of protecting the law-abiding. 

We look forward to bringing Treasury's forfeiture background to 
bear in working with the committee to strike a desirable, well-bal- 
anced reform. 

Thank you. 

Mr. Hyde, Thank you. 

[The prepared statement of Ms. Blanton follows:] 

Prepared Statement of Jan P. Blanton, Director, Executive Office for Asset 
Forfeiture, Department of the Treasury 

Mr. Chairman, and to all the members of the Committee, eood morning. My name 
is Jan Blanton and I am the Director of the Department of the Treasury s Executive 
Office for Asset Forfeiture. I am pleased to appear before you today to ofTer our per- 
spective on H.R. 1916 and the changes it would bring about in federal forfeiture. 
With vour permission, I would like to make a brief opening statement after which 
I would be glad to answer any questions you or the other members may have. 

Civil for^iture has been an authority of Treasury law enforcement that dates 
back to the very founding of our Republic. In the last dozen years, however, the 
Congress has developed and expanded forfeiture to enable all of federal law enforce- 
ment to address the many varied manifestations of sophisticated, modem and finan- 
cially profitable crime. By allowing us to go after the proceeds and instrumentalities 
of crime, our use of asset forfeiture has now evolved to the point where it strikes 
at the very core of criminal organizations and has become an essential part of our 
overall enforcement strategy. 

The attractiveness of asset forfeiture and a reason for its growth in the United 
States is very simple — it takes the profit out of crime. Asset forfeiture is a program 
that cuts to the heart of most criminal activity, dismantling criminal syndicates in 



240 

a way that simple incarceration never could. By relentlessly focusing on the profit- 
ability of crime, it is an enforcement tool that keeps pace with evermore well-fi- 
nanced and internationalized criminal groups. 

It is an enforcement tool with notable interrelated benefits. It pays for its own 

f»roperty management costs and relieves additional burdens that otherwise would 
all to our law abiding citizens and taxpayers. It strengthens law enforcement by 
rechanneling forfeited value back into tnis most fundamental societal purpose. It 
promotes cooperation among federal, state and local police around tne country 
through our aoility to equitaoly share forfeited assets with those who have assisted 
in our investigations. It allows for victim restitution by permitting us to return the 
forfeited assets of criminals to those who were once their prey. Under the Weed and 
Seed Program, it turns tainted properties back to constructive community use. It 
even sanctions the donation of forfeited assets to charitable organizations and the 
transfer of forfeited monies to support our national effort to reouce the demand for 
illegal drugs. 

In just a few very specific examples, the canine and handler teams detecting fire- 
arms and explosives for the Bureau of Alcohol, Tobacco and Firearms, the enhanced 
security presence at this summer's Olympic Games in Atlanta and the anti-drug and 
violence presentations to elementary schoolchildren by police ofiicers in California's 
Orange County, would not be as far along as they are today were it not for the sup- 
port of federal forfeiture programs. 

We have arrived at this point through a reflective and measured expansion of for- 
feiture authorities, always guided by the fundamental belief that the strength of fed- 
eral forfeiture rests directly upon public confidence in the program's integrity. While 
we appreciate the intent of H.R. 1916 to safeguard that integrity, we have signifi- 
cant reservations about how this bill would aoversely impact today's federal forfeit- 
ure activities. 

The principal provisions of H.R. 1916 would amend several sections of the Tariff 
Act of 1930, codified in Title 19 USC, to: 

place the burden of proof on the United States in a civil forfeiture action; 
raise the standard of proof from probable cause to clear and convincing in a 
civil forfeiture action; 

eliminate the need to file a cost bond to have a claim of interest in property 
determined in a civil judicial proceeding; 

provide for appointment of counsel in a civil forfeiture action when a claimant 
cannot afford tnat representation; 

provide for the release of seized property prior to forfeiture if the seizure 
causes substantial hardship on a claimant; and, 

provide for a cause of action to require the release of pj'operty pending the 
completion of the forfeiture proceeding. 
In addition, the bill would amend Title 18 to provide for the Department of Jus- 
tice to pay for the compensation awarded by the courts for representation of claim- 
ants. 

Collectively, these provisions of H.R. 1916 present three problems that detract sig- 
nificantly from the bill's intended reform purposes. 

First, Title 19 is a commercial statute designed to facilitate trade, expedite the 
collection of fines, penalties and import duties, prohibit the introduction of contra- 
band items into the United States, protect intellectual property rights as well as the 
public health and safety. The changes proposed by H.R. 1916 would compromise the 
ability of the United States Customs Service to fulfill these vital responsibilities. 
Think about the message the United States would be sending to its trading partners 
if, at our borders. Customs officials could no longer seize and retain the sizable 
quantities of pirated products that steal from the inventiveness and creativity of 
American workers. Indeed, in those, instances where the detention of property 
serves as an appropriate substitute for a lien, the ability of the Secretary oi the 
Treasury to collect customs revenues could be impaired. 

Second, it is our belief that H.R. 1916 would greatly increase the number of cases 
on an already crowded docket of the federal courts. Waiver of the cost bond, coupled 
with the appointment and compensation of counsel, would serve to encourage litiga- 
tion of even the most plainly forfeitable property interests. 

Third, H.R. 1916 will make it more dimcult for the United States to deprive crimi- 
nal violators of their ill-gotten proceeds. Generally, it will make it more difficult to 
detain property — at the border. Releasing proper pending completion of the forfeit- 
ure appears contrary to the very aims of current forfeiture law. 

As drafled, the provisions of H.R. 1916 may have a substantial impact on the fed- 
eral government's ability to detain dangerous food products, adulterated or unli- 
censed drugs, child pornography, illegal firearms ana unsafe consumer products at 
the border. It woula compromise our ability to protect intellectual property rights 



241 

and endanger a portion of customs revenues. Finally, federal courts' caseloads and 
law enforcement's ability to deprive individuals of the proceeds of their illegal activ- 
ity would be impacted significantly. 

We value the reasoned progress that the Congress and law enforcement have 
made in the last twelve years in the application of forfeiture authorities. We share 
the concerns of our colleagues at the Department of Justice and of you, Mr. Chair- 
man, that forfeiture law can and should be further refined to better ensure its rec- 
ognition of basic protections afforded property rights. We believe, however, that H.R. 
1916 is wide of tne mark in achieving the appropriate balance between individual 
property rights and the enforcement of our civil and criminal forfeiture statutes. Al- 
ternatively, we commend for your consideration the bill presented by the Adminis- 
tration, the provisions of which have just been highlighted by my associate at the 
Department of Justice and, most importantly, achieve the requisite balance. We 
have worked closely in the crafting ofthe Administration's bill and it contains sev- 
eral sections that broaden and enhance Treasury law enforcement authorities while 
supporting a conmion ^oal of better protecting rights to property. 

Perhaps because of its imposing power — a power not simply to incarcerate crimi- 
nals but to take down their organizations forfeiture today is all too often the subject 
of negative media coverage. Where federal forfeiture is involved, we accept the chal- 
lenge to ri^t the wrongs that may be done but such incidents should not obscure 
the many positive aspects of this formidable law enforcement mechanism. 

The Department ofthe Treasury has been entrusted with significant forfeiture au- 
thority for over two hundred years. We have exercised this authority in the pursuit 
of various illegal activities that threaten the safety, security and prosperity of the 
American people. Forfeiture is a legitimate authority bestowed by the citizens of the 
United States upon federal law enforcement. Our obligation, then and now, is to 
make proper use of it so that it may realize its most fundamental purpose of protect- 
ing the law abiding. We look forward to bringing Treasury's forfeiture background 
to bear in working together with the Committee to strike a desire able well-balanced 
reform. 

Mr. Chairman, this concludes my opening statement. I will be pleased to answer 
any questions you or the other members of the committee may have at this time. 
Thank you. 

Mr. Hyde. Mr. McMahon. 

STATEMENT OF JAMES W. McMAHON, SUPERINTENDENT, NEW 
YORK SATE POLICE, ON BEHALF OF THE INTERNATIONAL 
ASSOCIATION OF CHIEFS OF POLICE 

Mr. McMahon. Chairman Hyde, and members of the committee, 
I want to thank you for allowing me to testify on proposed reforms 
to the Federal asset forfeiture statutes today. 

I am here representing the International Association of Chiefs of 
Police, an organization of over 16,000 police executives, and as Su- 
perintendent of the New York State Police, a large full-service en- 
forcement agency. 

All too often in law enforcement, we see the criminals who defy 
our laws flaunt their illicit profits in material ways. They prey on 
our society, reaping rewards from their drug trade. 

The New York State Police, along with county and local agencies 
view asset seizure as an effective tool to mitigate the spread of il- 
licit narcotics by attacking the core of the narcotics trade, its illicit 
profits. By bringing this money back to law enforcement, we are 
able to dedicate it to further our efforts against narcotics and the 
violence it all too often fuels. 

The forfeiture law permits the seizure of the currency and real 
property of the criminal. This channels millions of dollars back to 
the law enforcement agencies involved. 

In New York State, we have been able to equip our personnel 
with necessary equipment, such as semiautomatic weapons in an 
effort to bring our officers more in line with the weaponry, and un- 



242 

fortunately, firepower used by the drug traffickers they often have 
to face daily on the streets of our society. 

Most recently, the asset seizures have enabled us to construct a 
state-of-the-art forensic center, a center capable of the latest tech- 
nologies and scientific procedures, including DNA, drug-testing se- 
rology and other important areas of criminal investigations. The fo- 
rensic center, a $25 million building has been paid for by illicit 
profits from the drug dealers and the violent criminals it will be 
used to analyze forensic evidence against. 

It will be a center that will benefit all of us in law enforcement 
in New York State, for over 50 percent of the cases handled by our 
forensic center come from county and local enforcement agencies. 
In these economic times we would not have been able, without the 
benefit of seized assets that we seize from the criminals in the drug 
trade, to build this building. 

Asset forfeiture is, without a doubt, a useful tool to law enforce- 
ment. We have been able to remove from criminals the proceeds of 
their illegal activities as well as the instrumentality they have used 
in committing their crimes. 

Most forfeiture cases in which the New York State Police are in- 
volved are drug cases. In these cases, simply taking the drugs is 
not sufficient. The illegal drugs themselves have no use to the law- 
abiding citizen. Their only purpose is to be sold to drug users. To 
disrupt the drug organizations, law enforcement needs to remove 
the profits generated by drug dealing as well as vehicles and real 
properties used in trafficking and/or acquired with illicit profits. 

There have been media stories of alleged abuses. And even some 
recent court decisions indicating a needs for reform. The lACP and 
other law enforcement groups have been meeting for more than 2 
years with representatives from the Department of Justice to con- 
sider where reforms should be made both to adequately protect the 
rights of property owners and to provide law enforcement agencies 
with more and better forfeiture tools to combat crime. 

What we do not want reforms to do is to make forfeiture under 
Federal law more complicated, cumbersome, lengthy and costly, nor 
do we want it to take away from law enforcement the funds it 
needs to effectively enforce the narcotics laws. 

Mr. Chairman, your bill, H.R. 1916, may be a good starting place 
on asset forfeiture reform. Many of the provisions in the bill State 
and local law enforcement agencies could and do accept in concept. 
But they would ask that modifications be made. In a moment I will 
deal with the actual provisions in H.R. 1916. 

I would like to first point out that there is a strong need to ad- 
dress the many inconsistencies and ambiguities that have arisen in 
the forfeiture law. There is also a need to extend forfeiture into 
other areas of law such as white-collar crime, terrorism and 
consumer fraud. 

If we are to consider reform, the lACP would prefer not to limit 
the task. H.R. 1916 is not legislation that States or local law en- 
forcement would object to. An amendment to the Federal Tort 
Claims Act, similar to that in section 2, would limit the law en- 
forcement exception to tort liability. This would ensure that inno- 
cent property owners are afforded a remedy when their property is 
damaged in the course of a forfeiture action. 



243 

Similarly, lACP does not object to the extension of the time pe- 
riod for filing a challenge for a forfeiture contained in section 3. Of 
more concern is the changing of the burden of proof contained in 
section 4. 

As drafted, the bill would shift the burden of proof to the govern- 
ment and raise the standard of proof to clear and convincing evi- 
dence. While law enforcement has been reluctant in the past to 
shift the burden to the Grovernment from the property owner, after 
showing a probable cause by the Grovemment we can see how this 
change would make the entire process appear more fair. 

We are troubled, however, by the elevation of the standard and 
would argue that the proper test should still be the preponderance 
of the evidence, the traditional civil burden of proof This seems 
fair to us in law enforcement, for most forfeitures are civil proceed- 
ings. 

Mr. Hyde. Let me say I tend to agree with you. I think I have 
no problem with the burden of proof being less than clear and con- 
vincing, but preponderance, and we will make that change. 

Mr. McMi^iiON. We appreciate that. 

Mr. Hyde. You have already won one. 

Mr. McMahon. I think we have already given two to you, Mr. 
Chairman. 

My last one, under section 6, which deals with the return of as- 
sets to property owners during the forfeiture proceedings, com- 
monly referred to as hardship return. The lACP would recommend 
that this remedy be reserved for circumstances where the property 
owner can establish likelihood of success on the merits. 

With that, Mr. Chairman, I want to thank you on behalf of all 
of us in law enforcement for the opportunity to be here today. 

Mr. Hyde. I thank you. 

[The prepared statement of Mr. McMahon follows:] 

Prepared Statement of James W. McMahon, Superintendent, New York State 
Police, on Behalf of the International Assocl\tion of Chiefs of Police 

Chairman Hyde and members of the Committee. Thank you for inviting me here 
today to testify on proposed reforms to the Federal Asset Forfeiture Statutes. 

First, I want to indicate how useful a tool asset forfeiture is to law enforcement. 
We have been able to remove from criminals, the proceeds of their illegal activities, 
as well as the instrumentality they have used in committing their crimes. Most for- 
feiture cases in which the Sfew York State Police is involved, are drug cases. In 
these cases, simply taking the drugs is not sufficient. The illegal drugs themselves 
have no use other than to be sold to users on the streets. The drugs are impure 
and contaminated, and they can be replaced by the distribution chain. To disrupt 
the organization, law enforcement needs to remove the cash generated by drug deal- 
ing, as well as vehicles and real property used in the trafficking. 

There have been media stories of alleged abuses, and even some recent court deci- 
sions indicating a need for reform. The lACP and other law enforcement groups 
have been meeting for more than two years to consider where reforms should be 
made — both to adequately protect the rights of property owners, and to provide law 
enforcement agencies with more and better forfeiture tools to combat crime. What 
we do not want reforms to do, is to make forfeiture under federal law more com- 
plicated, cumbersome, lengthy, and costly. 

Mr. Chairman, your bill, H.R. 1916, may be a good starting place for the debate 
on asset forfeiture reform. Many of the provisions in the bill, state and local law 
enforcement agencies could accept in concept, though not in the form as currently 
drafted. In a moment, I will deal with the actual provisions in H.R. 1916, but I 
would like to point out that there is nothing in the bill to address the many incon- 
sistencies and ambiguities that have arisen in the forfeiture law. It also does not 
extend forfeiture into other areas of the law, such as white collar crime, terrorism. 



244 

or consumer fraud. If we are to consider any reform, let's not limit our consider- 
ation. 

As to H.R. 1916, state and local law enforcement would not object to an amend- 
ment to the Federal Torts Claim Act, similar to that contained \n Section 2, that 
would limit the law enforcement exception to tort liability. This would ensure that 
innocent property owners are afforded a remedy when their property is damaged in 
the course of a forfeiture action. 

Similarly, we do not object to an extension of the time period for filing a challenge 
for a forfeiture, contained in Section 3. I do not know if the extension to 30 days 
is necessary, or if some shorter period would be adequate. 

Of more concern is the changing of the burden of proof contained in Section 4. 
As drafted, the bill would shift the burden of proof to the government, and raise 
the standard of proof to "clear and convincing evidence." While law enforcement has 
been reluctant in the past to shift the burden to the government from the property 
owner aftjer a showing of probable cause by the government, we can see how this 
change would make the entire process appear more fair. We are troubled, however, 
by the elevation of the standard, and would argue that the projier test should still 
be the "preponderance of the evidence." 

Section S of H.R. 1916 would eliminate entirely the cosi bond requirement. The 
cost bond requirement limits the number of challenges to the forfeiture and, thus, 
limits litigation. While we would be willing to consider a waiver of the bond for an 
indigent or poor owner, or a reduction of the bond by judicial discretion, elimination 
of the bond entirely does not seem to be necessary. 

Section 6 of the bill would permit owners to retain possession of their property 
pending forfeiture, where deprivation of the property causes economic hardship 
without posting any bond. While this ntught be possible for real property that cannot 
be removed from a jurisdiction, we would want to be sure an owner was not able 
to diminish the value of such property, perhaps by use of a bond. Personal property 
creates a very different problem, oecause it can, in many instances, easily oe phys- 
ically removed from jurisdiction of the court hearing the forfeiture. In these in- 
stances, a bond would seem necessary. 

Section 7, Appointing Legal Counsel for Indigents, would divert significant assets 
to the criminal defense bar. Traditionally, court-appointed (and paid for) counsel 
have only been used where a person's liberty is in jeopardy. 

Finally, Section 8 clarifies the innocent owner defense for drug forfeiture cases 
only, by permitting a person who is aware that his or her property is being used 
to commit a crime, to defend against the forfeiture on the ground that he or she 
did not consent to the illegal use. I believe this would be acceptable as long as the 
owner did actually take reasonable steps to prevent the illegal use. The whole area 
of innocent owner defense should be reviewed to be sure all ambiguities are elimi- 
nated. 

In summary, I repeat, H.R. 1916 is a good beginning for the reconsideration of 
the asset forfeiture laws, but it is just the beginning. Law enforcement would like 
other provisions included in any final reform proposal. 

I would be happy to answer any questions. Thank you. 

Mr. Hyde. Mr. Gekas. 

Mr. Gekas. I thank the Chair. 

I direct this to Mr. Cassella of the Department of Justice. 

The previous panel had as one of the paneHsts Mr. Komie, who 
stated that or alleged that memoranda had been circulated setting 
forth quotas which establish minimum seizures to be made by Fed- 
eral offices. In view of your testimony about how much money has 
been yielded over the years and how much has been shared with 
local authorities as a result of that, is there such a quota system 
that would lead to making sure that we reach half a billion dollars 
a year? 

Mr. Cassella. Absolutely not. I don't know where Mr. Komie got 
that idea from. I have been working in this program since 1989. 
There is no quota system. 

Mr. Gekas. Had you ever heard that allegation before? 

Mr. Cassella. In 1990, there was a memorandum sent asking 
law enforcement agencies to get their forfeitures in during that fis- 
cal year so that budget expectations could be met. That was cited 



I 



245 

in a Supreme Court case I think called the United States v. James 
Daniel Good Property. That was back in 1990. There has been since 
then no memoranda, no quota system, no effort whatsoever to try 
to turn this forfeiture program into a money-making operation. It 
is not that. 

Mr. Gekas. You say that the court commented on that memoran- 
dum? 

Mr. Cassella. Yes. It was a footnote in a Supreme Court case. 

Mr. Gekas. In what way? Adversely, or critically, or how? 

Mr. Cassella. They were making the point that it is appropriate 
for the Court to review the forfeiture laws closelv because the Gov- 
ernment enioys some benefit from enforcing the law, some financial 
benefit, ana cited the memoranda in a footnote to make that point. 

Mr. Gekas. Was any subsequent memo circulated to the effect 
that we should not have quotas? 

Mr. Cassella. I don't know if it was ever done in a written 
memorandum, but I speak regularlv at forfeiture training con- 
ferences for all of our prosecutors and law enforcement agents, and 
we regularly make the point that this is not to be driven by money, 
we do not seize property for the purpose of bringing in revenue, 
and we are not going to nave any quota system. 

Mr. Gekas. Thank you. 

Ms. Blanton, in your testimony you include a statement that you 
worry about the implementation of this bill because it would serve 
to encourage litigation of the most plainly forfeitable property in- 
terests. We, too, have always been concerned about a multiplicity 
of actions flooding the courts in this and other arenas. 

Listening to testimony having to do with Mr. Jones, we found 
that because he was unable to use the process in place to fight that 
seizure, his lawyer used another forum or another predicate upon 
which to base the claim, so they were in court anyway. Even if it 
would be a desired end of all of law enforcement to keep down the 
number of actions, the failure to include in our law something to 
give potential relief to an innocent party would breed actions any- 
way. Am I correct in that assumption? 

Ms. Blanton. Sir, in my testimony, we basically agree; we have 
no argument. We know that there are reforms needed in civil for- 
feiture today. What we would like to see, is that those changes are 
not made to title 19 but to title 18, so that uniform innocent owner 
provisions apply uniformly across the board and to all civil forfeit- 
ures under the Federal Criminal Code, not at title 19. 

Mr. Gekas. I have in front of me the administration's proposal, 
and in large part at least the summaries indicate that most of the 
bill at hand that the chairman has produced here — most of those 
proposals are, in one way or another, endorsed by the administra- 
tion bill. 

I am going to read off a bullet for the Hyde bill, and maybe one 
of you can answer yes or no, is it included in the administration's 
proposal? 

For instance, it puts the burden of proof on the Government. We 
agree that that should be a 

Mr. Hyde. With a change in the standard to "preponderance" as 
against "clear and convincing." 

Mr. Gekas. Yes. Provides fair notice to challenge of forfeiture. 



246 

Mr. Cassella. That is correct. 

If I may, Mr. Gekas, the proposal in the administration's bill 
would give property owners 30 days from the last publication of no- 
tice of the forfeiture, which is actually a little bit longer than the 
period in H.R. 1916. 

Mr. Gekas. And eliminates the cost of a — cost bond requirement? 

Mr. Cassella. No, Mr. Gekas. We don't favor the absolute aboli- 
tion of the cost bond, but we favor a phasing out of the cost bond. 
I can tell you why, if you want to, later. 

Mr. Gekas. So there is one bullet that has gone astray. Allows 
for the release of property pending final disposition of a case in cer- 
tain cases? 

Mr. Cassella. We have that concept in, in a different form, Mr. 
Gekas. We propose to allow the property to be released pending 
trial, if substitute property is submitted or if there is some show- 
ing, as Mr. McMahon pointed out, of a likelihood of success on the 
merits. 

Mr. Gekas. Provides for the appointment of counsel for 
indigents? 

Mr. Cassella. No, we don't do that. 

Mr. Gekas. Well, there is another one, Mr. Chairman, that we 
will look at closely. 

Provides a remedy for property damage caused by Government 
negligence. 

Mr. Cassella. Yes, we have the Tort Reforms Act proposal in the 
legislation. 

Mr. Gekas. All right. I say to Mr. McMahon that it would be val- 
uable to us if you would do a side-by-side — well, maybe you already 
have — between the administration's proposal and the Hyde bill, 
and whatever stark differences there are that you wish us to ad- 
dress we would be happy to accommodate. Your testimony does 
cover some of that. 

Mr. McMahon. Sir, we have been working with Justice and the 
lACP on their bill, and I think they have already done that, and 
the ones we have addressed here are the ones of main concern to 
us. 

Mr. Gekas. I thank you. 

And, Mr. Chairman, I yield back the balance of my nontime. 

Mr. Hyde. I thank the gentleman. 

Let me just say that my staff has been working with Mr. 
Cassella, the Justice Department, and with the Treasury Depart- 
ment working with the Justice Department, and we are making 
progress. We are making substantial progress. I expect over the 
month of August, when we all will be otherwise engaged, the staffs 
will be engaged in refining their agreements and disagreements, so 
that at the end of August and the beginning of September, we 
should have a product that we can expect support from Treasury 
and Justice and that will do the things we want it to do, which we 
heard egregious examples this morning that need attention in the 
law. 

And I am pleased and gratified that we are not at odds or at 
swords' points. There are some differences that will remain and 
may still exist after our meetings, but I am very encouraged by the 



247 

spirit of cooperation that we are getting. And so we are not adver- 
saries at all on this. 

Mr. Frank. 

Mr. Frank, Thank you, Mr. Chairman. I am glad we are making 
progress. 

Mr. Cassella, you said "phasing out the bond." Do you mean 
chronologically or financially? I mean, how are we phasing it out? 

Mr, Cassella. The problem. Congressman, is that we have to 
strike a balance. 

Mr. Frank. How are you going to do it? 

Mr. Cassella. The cost bond serves an important purpose. It dis- 
courages the filing of frivolous claims. What we have to do is strike 
a balance between discouraging frivolous claims and inadvertently 
discouraging bona fide claims. So we would propose to codify the 
rule that no cost bond is required for someone who has status as 
in forma pauperis position. That is number one. 

Mr. Frank. Yes. 

Mr. Cassella. Second, we would ask the authority for the Attor- 
ney Greneral and the Secretary of the Treasury to waive the bond 
in those circumstances where it isn't needed to protect the Grovern- 
ment from maintenance costs and storage costs. 

For example, seizure of currency or the seizure of a bank ac- 
count: There is no need for a cost bond in that situation to protect 
us from costs, and if we waived it in those circumstances, we could 
see how many claims are filed, frivolous or otherwise. 

The problem. Congressman, is the number of seizures that we do 
every year. Justice does about 30,000 seizures per year. This is a 
page from USA Today. It appears every Wednesday, and it lists the 
seizures for the previous 3 weeks just by the DBA, 

Mr. Frank. How many of them are overturned? 

Mr, Cassella. Sorry? 

Mr. Frank. Can you give us the numbers, how many of the for- 
feitures are ultimately successfully challenged? 

Mr. Cassella. Successfully challenged, very, very few. Eighty 
percent of them are never even challenged; 80 percent of our for- 
feitures are administrative forfeitures in which there is no claim 
filed at all. 

Mr, Frank, Those in which there are challenges, I would be in- 
terested in the statistics, how many of the challenges are success- 
ful, 

Mr. Cassella. If we have those statistics, Congressman, we will 
try to get them for you, 

[The information follows:] 



248 , 

\ 




U.S. Department of Justice 



1 



t»bshmielon. DC 2000 



The Honorable Henry J. Hyde, Chairman, 
Committee on the Judiciary 
U.S. House of Repreaentatives 
Washington, D.C. 20515 

Dear Congressman Hyde : 

At a Judiciary Committee hearing on July 22, 1996, on 
pending asset forfeiture legislation, Congressman Frank asked the 
Department of Justice witness to provide statistics on the number 
of forfeiture cases that result in judgments against the United 
States in a given year. We have reviewed the available 
statistical sources and have attempted to answer your question as 
best we can as follows: 

In a typical fiscal year, the agencies of the Department of 
Justice seize property for forfeiture in approximately 35,000 
cases. Eighty- five percent of the FBI and DEA cases, and nearly 
99 percent of the INS cases are uncontested;' thus approximately 
2500 Justice cases are referred to the U.S. Attorneys. We do not 
have comparable statistics for the Treasury Department. The 
Treasury agencies, however, make ten of thousands of seizures a 
year and we believe that a similar number of Treasury cases are 
also referred to the U.S. Attorneys. 

Of all eases referred to the U.S. Attorneys, some are 
declined because they do not meet threshold requirements 
regarding minimum property value or other criteria, including 
legal merit, established by the U.S. Attorneys. Others become 
part of criminal forfeiture cases. ^ In the end, the U.S. 



^ Over the past ten years, the rate of contested claims in 
DEA cases ranged from 12 percent to 16 percent and averaged 14.2 
percent- FBI statistics are similar. INS considers only 1 
percent of its cases "contested" because INS generally attempts 
to settle cases at the administrative stage before they are 
referred to the U.S. Attorney. 

^ There is a related arrest or prosecution in 80 percent of 
the cases in which there is a seizure for forfeiture. But for a 
variety of reasons -- most having to do with the ability to 
obtain clear title against third parties -- prosecutors in the 
past generally filed parallel civil forfeiture cases rather than 



249 



"Attorneys file between 2,000 and 5,000 civil forfeiture cases a 
year. The number of filings for the past four years are as 
follows: 



FY 


1992 


1993 


1994 


1995 


Cases Filed 


5083 


4399 


2941 


2193' 



2337 


1836 


1379 


85 


63 


48 


3.64% 


3.63% 


3.48% 



Of these cases, many are settled but somewhat more than half 
result in a judgment for or against the United States. The 
figures for the past fo\ir years are as follows: 

Judgm for U.S. 2569 

Judgm against 105 

Percent adverse 4.90% 

Thus, the government prevails in 96 per cent of the cases 
that go to judgment and in 98 per cent of all cases that are 
filed, and the number of adverse judgments represents a minute 
fraction of all cases initiated by seizure. 

We hope these statistics are helpful in answering 
Congressman Frank's question. 

Sincet-ely, 

Andrew Fois 

Assistant Attorney General 

cc. The Honorable John Conyers, Jr. 
The Honorable Barney Frank 



make the forfeiture part of the criminal indictment. Therefore, 
the number of cases that resulted in criminal forfeiture was 
smaller than the number that result in civil forfeiture. The 
recent trend is toward parity. 

' The drop in the number of civil filings is due both to the 
shift to criminal forfeiture and the overall decrease in the 
number of seizures in the past two years due primarily to 
uncertainly over the double jeopardy effect of civil forfeiture. 



250 

Mr. Hyde. Would the gentleman yield just for a second? 

Mr. Frank. Sure. 

Mr. Hyde. Mr. Cassella, we heard some startling testimony from 
Mr. Jones this morning about the bond and the failure to waive the 
bond. 

Mr. Frank. That was cash. I mean, that was cash, wasn t it? 

Mr. Hyde. Yes. 

Mr. Cassella. That is right. We are 

Mr. Hyde. Did you have anything to do with that case? 

Mr. Cassella. No, I certainly didf not, Mr. Chairman. 

One of the things we are suggesting in our legislation is that we 
have the authority to waive the bond other than in in forrna 
pauperis situations; that is, to also waive it in cash or currency sit- 
uations. We don't have that authority today. The law requires us 
to waive it — there is case law that requires us to waive it for pau- 
pers. 

Mr. Jones, if I understand from what I heard this morning cor- 
rectly, filed a financial statement indicating that he was a pauper, 
and the Government disagreed. They disagreed that his financial 
statement put him in that status. 

Reasonable minds can disagree. The important thing is that 
there be remedies. And if we can waive the cost bond in some cir- 
cumstances and thereby not clog the Federal courts with, you 
know, 30,000 more Federal cases every year, we would like to be 
able to do it. 

Mr. Hyde. Well, due process is costly, I will agree, and time con- 
suming, but it is worthwhile. So we need to find a way to do this. 

Mr. Cassella. Exactly. 

Mr. Hyde. But I thank the gentleman. I didn't mean to inter- 
rupt. 

Mr. Frank. I would think people who had a — well, we are getting 
into the counsel thing. 

So your proposal would be to automatically waive it for paupers? 

Mr. Cassella. Correct. 

Mr. Frank. And the Government would have discretion to waive 
it where cash was involved or other elements that didn't have a 
storage cost? 

Mr. Cassella. That is correct. What we want to find out. Con- 
gressman, is, are we correct in our thought that abolishing the cost 
bond requirement overnight would flood the Federal courts? 

Mr. Frank. Let me ask you: You still — people would still have 
to hire a lawyer to bring that suit; right? 

Mr. Casselij>i. Well, they could also file it pro se. But you mean 
if somebody wanted to be represented by counsel, he would have 
to pay for counsel, yes. They have a remedy, of course, Congress- 
man, and that is under the Equal Access to Justice Act. If they pre- 
vail, it would be 

Mr. Frank. If they are small. Under Equal Access to Justice, 
they have to be a small business. 

Mr. Cassella. They have to have less than $2 million in assets. 

Mr. Frank. The next issue then is objecting to appointing coun- 
sel where people — I assume that is where they can't afiFord it. You 
still object to that? Someone files an in forma pauperis petition, it 
is granted, and you still wouldn't give them a lawyer? 



251 

Mr. Cassella. That is right. Taken together with the idea of 
abolishing the cost bond, the appointment of counsel could become 
a horrendously expensive proposition. Again, we want to strike a 
balance. We want to make sure there is a remedy under the Equal 
Access to Justice Act. 

Mr. Frank. What is the remedy if I can't afford a lawyer? 

Mr. Cassella. The Equal Access to Justice Act. 

The point I was trying to make, Congressman, is that unlike a 
criminal case where we file an action, the United States v. John 
Doe, John Doe is clearly the defendant. 

Mr. Frank. I understand that. You can take that as understood. 

Mr. Cassella. Right. But in a civil action, which is an in rem 
action, anyone could file a claim. If you try to forfeit an airplane, 
the pilot might file a claim, the owner, his wife, a lienholder. 

Mr. Frank. Well, you can deal with that by allowing the appoint- 
ment of counsel only for people who had a very colorable claim. I 
think that is — if you really want to do that, that would not be a 
problem. I think, frankly, that is a "make wait" argument. That is 
not really why you want to do it. 

What about a narrow right to counsel? I mean, it does seem to 
me pretty outrageous — you admit we do make some mistakes. And, 
again, I guess I should go back to one central point. I don't accept 
the distinction, as you make it, between a civil and criminal situa- 
tion. 

Let me ask: In every case of forfeiture, do we not assume that 
some crime has been committed? Isn't there a crime that has been 
committed as a predicate for every forfeiture? 

Mr. Cassella. There is. There has to be a crime committed be- 
fore there is a forfeiture. The question is, is it proved? 

Mr. Frank. So the very notion of forfeiture presupposes that 
there has been= a crime committed? 

Mr. Cassella. Correct. 

Mr. Frank. I think that is important, because I think that helps 
make it, to me, harder for you to argue that this is purely civil and 
here is criminal and here is civil. What you are talking about is 
something which you believe should happen as the consequence of 
a crime, and obviously it is not the same as being incarcerated, but 
you have an untenable distinction to treat this as wholly civil. It 
is civil, triggered, we all agree, by a crime. 

And where someone may have falsely been accused of a crime 
and, as a consequence, had his property seized, like the gentleman 
on the first panel, and has no money, and you agree he has no 
money, not to appoint a lawyer and to then put him to the Equal 
Access to Justice, I think, is a very — I don't understand it, and that 
is not the balance, that is the Grovernment's convenience, and I 
think it is inconsistent with what I thought, frankly, to be the 
views of this administration on social justice and fairness. So that 
is one I hope we will not accede to. 

The next issue I have is — and this one actually kind of bothers 
me — you said from the public finance standpoint — now, frankly, I 
don't think it matters whether you have quotas or not; you have 
something better than quotas, an incentive. I mean, if the agency 
I work for is going to be substantially enhanced in its budget by 



252 

all these successful forfeitures, that is a good incentive. It doesn't 
mean people are bad people, but that is an obvious incentive. 

Mr. Cassella, you said in some cases the forfeiture — the proceeds 
of the forfeiture are given to other agencies, private agencies? Did 
you say that? 

Mr. Cassella. Well, the first priority, Mr. Congressman, is to 
look to see if there are any victims. 

Mr. Frank. I agree that we should do that. That is true. 

Mr. Cassella. That is what happens first. If there are — once the 
victims have been compensated, or if there are no victims, then the 
property is deposited into the Federal Assets Forfeiture Fund. 
About half of that money is shared with State or local agencies in 
accordance with what part of the investigation they participated in. 
If they did half the work, they would get half the money. 

Mr. Gekas. Would the gentleman yield just for a moment? 

Mr. Frank. Yes. 

Mr. Gekas. That is because the law states it is to be divided. 

Mr. Cassella. That is right. 

Mr. Gekas. We here several years ago passed the legislation and 
debated that verv thoroughly. It isn't that you are feeling kindly 
towards the local authorities. The law says you have to share it. 

Mr. Frank. No. It is just that we were feeling kindly to the local 
authorities. Let's give credit where credit is due. 

Mr. Gekas. Right. 

Mr. Frank. Now that we have established ourselves as a foun- 
tain of all charity, let's get back to my question. At what point does 
this get distributed to other organizations? 

Mr. Cassella. The State or local law enforcement agency is au- 
thorized to distribute 15 percent. It can pass through 15 percent of 
the money that comes from the Federal Government on to commu- 
nity-based organizations. 

Mr. Frank. Does the Federal Grovernment do that? What do we 
do with our share? 

Mr. Cassella. Our share gets appropriated out of the fund, and 
it goes to administer the Federal Forfeiture Program. 

Mr. Frank. Appropriated out by the regular appropriations proc- 
ess? 

Mr. Cassella. That is my understanding, but I don't 

Mr. Frank. Ms. Blanton. 

Mr. Cassella. Sorry. 

Mr. Frank. I was asking Ms. Blanton. She was hitting her 
switch there. 

Ms. Blanton. Those moneys are used to pay for the cost of stor- 
ing and maintaining the property. 

Mr. Frank. How do you decide — what if there is any surplus over 
and above? I mean, storing somebody's money in a bank generally 
doesn't cost you a lot of money if you have deposited it; might even 
make you a little money. 

Ms. Blanton. That is true. We pay off third party interests and 
lien holders, if there are lien holders, such as banks, against sei- 
zures of vehicles or other properties. We use the money to 

Mr. Frank. Is there a surplus? 

Ms. Blanton. There has been at Treasury for the last 2 years, 
and that money is used for law enforcement purposes at the Treas- 



253 

ury Department. I can't speak to Justice as to whether they have 
had a surplus the last 2 years. 

Mr. Cassella. We had a surplus in the past, Congressman, and 
there was a provision in the law — it may still be in effect — that the 
surplus would go to the Drug Control Policy Director's Office. For 
the last year 

Mr. Frank. If I might just — ^you have answered enough of that. 
That is, one of the things I think we should do — what the State 
and local people do, that is a matter for State decisions, but from 
the standpoint of public finance, it does seem to me that this 
money should not be dispensed any differently than any other pub- 
lic money. That is, it ought to be subject to the appropriations proc- 
ess. 

And you don't want to have an accident because of — for instance, 
I was a little disturbed to hear that security of the Olympics, Mr. 
Cassella — maybe it was Ms. Blanton — said security of the Olympics 
was enhanced because of seizures. See, that seems to me to be 
nuts. 

If we are going to provide security at the Olympics, it ought to 
be based on an assumption of what kind of security we need, and 
then we pay for it. The notion we would have less security if we 
had had fewer seizures makes you want to have a seizure. I mean, 
that is no way to run a government. 

Ms. Blanton. That statement came from me. About 2 months 
ago or maybe less. There were more Federal law enforcement offi- 
cers needed to assist with security at the Olympics. There was no 
other source of funding in Treasury's appropriation. We did not 
have any additional funds to provide those monies, and so we used 
some of the money 

Mr. Frank. How much? 

Ms. Blanton. I believe it is less than $2 million. 

Mr. Frank. OK I think the forfeiture thing is a good thing, but 
I have got to be honest with you, Ms. Blanton. I think if the people 
who are in charge of security came to the Speaker and said, "Gee, 
we are a little short of money here in the greater Atlanta area for 
the security we need," you probably would have got it. You prob- 
ably didn't need the seizure thing. 

I don't think we ought to be justifying the seizures by arguing 
that, oh, we need it for this important Government program or that 
important Government program. We are talking about money 
taken from private citizens. If they have committed crimes and the 
money is gotten illegally and it could be used for departments, that 
is OK, that is not a basis for an appropriation, and I would dis- 
agree very much with that kind of argument because that could 
lead to incentives to do more than should be done, and it is also 
no way to run a Government. 

We don't say, "Gee, this is really an important program, and if 
we catch enough crooks, we will be able to deal with it." I don't 
think that is, in fact, how it works. I mean, I think invoking Olym- 
pic security probably gives this program more credit than it needs. 
I believe this Congress would have voted you the money for the 
Olympic security without that. 

Mr. Cassella. Congressman, just to m.ake the record clear, the 
Attorney General does receive an appropriation of the money com- 



35-668 96-9 



254 

ing out of the forfeiture fund through the regular appropriations 
process. 

Mr. Frank. I think that is the way it should be done. At the 
State and local level, I think it is reasonable to give them the 
money, and that is a decision to be made at the State level. I would 
argue for the same thing, but that is for them to decide. 

My last point is just, I just want to be clear, on the damage and 
interest, are we in agreement that where you win back your prop- 
erty, because the Government can't meet the preponderance of the 
evidence, burden of proof, you are made as whole as it is possible 
to be made through a combination of interest on cash or damages 
restored? 

Mr. Cassella. That is correct. Congressman. We have proposed 
that the Government be liable for interest, and we have also pro- 
posed that the Tort Claims Act be amended so that a person who 
feels that his property was damaged while in the custody of the 
Government could have 

Mr. Frank. What about if my house is taken and I had to go live 
somewhere else for 2 years and pay rent? The principle ought to 
be, we are not making it easy for you to get the money back. If you 
can win in court against the Government, if they took your prop- 
erty inappropriately, that vou were, in effect, inappropriately ac- 
cused, inaccurately accused of a crime, shouldn't we make you as 
whole as possible? 

Mr. Cassella. Certainly. The reason I was pausing is because, 
in general, we don't seize real property, but I don't want to 

Mr. Frank. That wouldn't be a problem then if we added that? 

Mr. Cassella. Right. I don't want to argue a hypothetical, but 
some other example 

Mr. Frank. It is not hypothetical. You never seize real property? 
Maybe that was a State case we had. 

Mr. Cassella. We used to, but since the Supreme Court decided 
a real property case in about 1993 we have a "post and walk" pol- 
icy. We post the property, indicate that it is subject to forfeiture, 
inventory, the contents — we don't seize it. 

Mr. Frank. The people can still live there? 

Mr. Cassella. The people live there, yes. 

Mr. Frank. OK. Thank you, Mr. Chairman. 

Mr. Hyde. Well, I thank the gentleman. 

I have a problem with recovery for negligence on the part of the 
Government to damaging the property while it is in their custody. 
What about a situation where they deliberately damage the prop- 
erty, as they did this man's sailboat? You can't say it was neg- 
ligence when they took the axes to it and drilled the holes in it 
looking for drugs. Do we cover that situation where there is delib- 
erate damage to the property? 

Mr. Cassella. I don't know whether the language in either of 
our proposals does, but it should, and we can work to make sure 
it does. 

Mr. Hyde. Would you give us your thinking on that? because you 
wouldn't — I wouldn't want the Grovemment to escape saying, "Well, 
we weren't negligent." 

Mr. Cassella. We did it on purpose. 

Mr. Hyde. "We intended to destroy your property." 



255 

Ms. Blanton. Mr. Chairman, since that occurred, Customs Serv- 
ice now has authority to pay in those situations and I think the 
issue back when that situation was occurring, was no statutory au- 
thority to pay. 

Mr. Frank. If I might say, Mr. Chairman, that grew out of a pri- 
vate bill which we had a few years ago, and I think we ultimately 
passed a statute, Mr. Gekas and I. Ultimately, we had to give them 
statutory authority over their objection to be able to do that. 

Mr. Hyde. My recollection is in this yacht or boat case, the gen- 
tleman could not prove negligence because it wasn't negligent; they 
intended to do what they did. 

Ms. Blanton. They had a warrant, is my understanding, of that 
case. And when law agents are lawfully executing a warrant to 
search, so it was not considered negligence. 

Mr. Hyde. True. But the problem is, warrants are issued on 
probable cause and rumors, and the man's boat was ready to sink 
when they got through it with, and nobody is to blame. 

OK Well, anyway, thank you for your contribution and your con- 
tinued contribution, because we intend to work with all of you. We 
want you all to support the eventual product. We may have a little 
different approach to this, but I am sure you understand — you 
heard this morning's testimony. No one can be comforted by that, 
and we want to redress that and prevent that from happening 
again, without impacting negatively on criminal asset forfeiture. 

We all agree — I do, I know Mr. Frank does, I assume he does, 
and Mr. Gekas — that it is a useful weapon, resource, in the strug- 
gle against serious crime. But these abuses have to be eliminated, 
the possibility of them, so that the integrity of the programs and 
the Government's integrity is protected. So we all are serious about 
that, as you are, too. 

I thank you very much. 

Mr. Cassella. Thank you, Mr. Chairman. 

Ms. Blanton. Thank you. 

Mr. McMahon. Thank you. 

Mr. Hyde. We have a final panel. Before they approach the table, 
we have Terrance G. Reed, who is chairperson of the RICO Forfeit- 
ure and Civil Remedies Committee, the Section on Criminal Justice 
of the ABA; and Mark Kappelhofif, legislative counsel for the 
ACLU, and E.E. (Bo) Edwards of the National Association of Crimi- 
nal Defense Lawyers. But we have a bill on the floor. It is sched- 
uled at — we go in at 12, and we are not sure at this moment how 
soon after 12 the bill will be called. I have to manage the bill. We 
are going to break. 

Mr. Frank. I have the other half, Mr. Chairman. 

Mr. Hyde. You have the other. 

Mr. Frank will also be there. 

I hate to do this to you, but is 2 p.m. too late to resume? Will 
that work a hardship on any of you? We will give you time to — 
is that all right? 

Mr. Kappelhoff. 

Mr. Kappelhoff. Fine. 

Mr. Frank. Mr. Chairman, when you come to Congress the day 
is shot anyway, so I don't think there's a problem. 



256 

Mr. Hyde. All right. Cxood. Then the committee will stand in re- 
cess until 2 p.m. 

Thank you. 

[Whereupon, at 11:45 a.m., the subcommittee recessed, to recon- 
vene at 2 p.m.] 

Mr. Hyde. The Chair is advised that at least one other Member 
is en route and we have a quorum from this morning so the com- 
mittee will come to order. 

Our final panel consists of Terrance G. Reed, chairperson of the 
RICO Forfeiture and Civil Remedies Committee of the Section on 
Criminal Justice of the American Bar Association. He will be fol- 
lowed by Mark Kappelhoff, legislative counsel for the American 
Civil Liberties Union; and E.E. (Bo) Edwards, from whom we heard 
earlier, will testify on behalf of the National Association of Crimi- 
nal Defense Lawyers. 

We will commence with Mr. Reed. Thank you for your patience 
in waiting. I really appreciate it. I know time is something we all 
treasure, and unfortunately in this process it gets abused some- 
times. 

STATEMENT OF TERRANCE G. REED, CHAIRPERSON, RICO, 
FORFEITURE, AND CIVIL REMEDIES COMMITTEE, SECTION 
OF CRIMINAL JUSTICE, ON BEHALF OF THE AMERICAN BAR 
ASSOCIATION 

Mr. Reed. Thank you, Mr. Chairman. I am here on behalf of the 
American Bar Association and it is with great pleasure, too. 

I am here today to tell this committee that the American Bar As- 
sociation supports the chairman's bill, H.R. 1916. We have pre- 
viously provided a statement to the committee, a written state- 
ment, and I will not go over that material again, but will summa- 
rize the ABA's position of support. 

H.R. 1916 is a very important bill because it for the first time 
aims at protecting innocent property owners through the creation 
of fair judicial procedures. The ABA stands solidly in support of 
this worthy objective. 

The ABA has been involved since 1983 in promoting various 
types of forfeiture reforms, and in February of this year the ABA 
officially endorsed a statement of principles which was enacted by 
the house of delegates to urge Cong^ress to engage in a series of re- 
forms of the forfeiture laws. The bill H.R. 1916 fits closely within 
the objectives of the ABA's statement of principles. 

I would like to focus briefly on what may be the most important 
contribution of the act to the civil forfeiture law, and that is section 
4, the section which deals with the standard of proof by which pri- 
vate property becomes confiscated and forfeited to the U.S. Govern- 
ment. 

Currently, as the Chair is aware and as was discussed this morn- 
ing, the standard of proof on the Government is hardly a standard 
at all. That is the probable cause standard. That has been defined 
as sufficient evidence and not to be more than a prime facie case. 
So here under the probable cause standard the Government can 
civilly forfeit property of private citizens for a far lesser showing 
than is necessary to convict someone of a crime and on a lesser 



257 

showing than is necessary to hold an individual civilly liable in 
such an action in torts. This is an unfair standard of proof. 

The standard of proof that the Government is put to the probable 
cause standard, is that standard which is sufficient to justify a 
search. It is also that standard which is sufficient to justify an in- 
dictment, which is simply an allegation is not particularly proof of 
a crime. 

Now it is true that the search of a home is not nearly as intru- 
sive as the loss of a home, but that same standard is used for both 
in the civil forfeiture laws. If the Government can establish 
through hearsay that a private property owner, the home of a prop- 
erty owner has been in any tangential way associated with crimi- 
nal activity, they lose the home, notwithstanding the fact that they 
are not accused of a crime themselves. 

Similarly, the probable cause standard is considered sufficient in 
the Constitution to justify an indictment which is a mere allega- 
tion, and every day throughout this country juries are told that an 
indictment is not evidence of anything. It is not sufficient on its 
own to justify a conviction or for that matter is not even evidence 
of a crime. Yet this is the standard by which the Federal Govern- 
ment is held and it is, frankly, far too inadequate a standard. 

The probable cause standard is in many ways the root problem 
in the civil forfeiture laws, a standard so low as to be a siren for 
the abuse of the civil forfeiture laws. It allows the Federal Govern- 
ment to seize and confiscate homes on the standard of proof nec- 
essary solely to justify searches. And as this committee is probably 
aware, that standard has been reduced somewhat over time. 

We find courts authorizing the search of individuals and of 
homes based on profiles, drug courier profiles, which we heard so 
much about this morning. That balancing test which is done by 
courts is a little more understandable when the consequences of fit- 
ting a drug courier profile are that you are stopped for a discussion 
as to whether there is sufficient evidence to go further to detain 
someone. Here that standard has been held sufficient, satisfying 
the drug courier profile to justify losing a home. When someone 
spends 20 or 30 years paying off a mortgage on a house, which is 
something that is part of the American dream, it should not evapo- 
rate with a mere satisfaction in the eyes of a law enforcement offi- 
cial that that person's demeanor fits a drug courier profile. 

The other aspect of why the probable cause standard is an invita- 
tion to abuse is it allows civil forfeiture of property without use of 
admissible evidence. Forfeiture can be justified solely based on 
hearsay, meaning that civil forfeitures are implemented outside of 
the adversary process, which is what our civil system of justice and 
criminal system of justice is based upon, where the party making 
the claim bears the burden of proof In that respect, the bill H.R. 
1916 will work a significant improvement on the current system of 
civil forfeiture. 

There are other provisions of the act which I will not address at 
this time given the shortness of time, but in summary, the Amer- 
ican Bar Association stands solidly behind the bill and would urge 
that this committee take swift and prompt action on it. 

Mr. Hyde. Thank you very much, Mr. Reed. 

[The prepared statement of Mr. Reed follows:] 



258 

Prepared Statement of Terrance G. Reed, Chairperson, RICO, Forfeiture 
AND Civil Remedies Committee, Section of Criminal Justice, on Behalf of 
THE American Bar Association 

Mr. Chairman and Members of the Committee, the American Bar Association 
("ABA") is pleased to appear before vou to express our views on H.R. 1916, the 
"Civil Asset Forfeiture Reform Act" (the "Act"). My name is Terrance G. Reed, and 
I have been designated by ABA president Roberta Cooper Ramo to represent the 
ABA. 

I am an attorney in private practice with the law firm of Reed & Hostage, P.C. 
in Washington, D.C., and I currently serve tis the Chair of the RICO, Forfeitures, 
and Civil Remedies (Committee of the ABA's Criminal Justice Section. I have served 
as the ABA's Advisor to the National Conference of Conrmiissioners on Uniform 
State Laws ("NCCUSL") from 1990 to 1994, and provided the ABA's input on 
NCCUSL's successful effort to enact a Uniform Forfeiture Act for the states in 1994. 
My experience includes representation of property owners, crime victims, and crimi- 
nm defendants in civil and criminal forfeiture litigation. 

Although the ABA has been an advocate of forfeiture law reform for more than 
a decade, in February 1996 the ABA endorsed a Statement of Principles calling for 
specific statutory revisions, including several which are contained in H.R. 1916. A 
copy of this Statement of Principles is attached as Exhibit A. The ABA's adoption 
of forfeiture reform principles reflects the fact that a consensus has emereed within 
the legal profession that civil forfeiture laws, while important and useful law en- 
forcement tools, also place considerable power in the hands of the government to 
take private property, and that measured laws are the best mechanism to insure 
that tnese powers are not abused. 

As the Supreme Court has repeatedly admonished, "broad forfeiture provisions 
cany the potential for government abuse and 'can be devastating when used un- 
justly.'" Libretti v. United States, 116 S. Ct. 356, 365 (1995) (quoting Caplin & 
Drysdale v. United States, 491 U.S. 617, 634 (1989)). In summary, the ABA sup- 
ports the need for civil forfeiture reforms, and it has already endorsed some of the 
reforms which are codified in H.R. 1916. 

1. THE ABA endorses THE CURRENT NEED FOR CIVIL FORFEITURE REFORM 

In February 1996, the ABA approved a Statement of Principles governing forfeit- 
ure laws which endorses the use of the forfeiture laws, especially to confiscate the 
profits of crime, but also urges a number of procedural reforms, some of which are 
contained in H.K. 1916, whicn will make civil forfeitures more fair and just. In some 
respects, the ABA's Statement of Principles is broader than H.R. 1916, as it ad- 
dresses the need for other civil forfeiture reforms, as well as reforms of the federal 
criminal forfeiture laws. Nonetheless, the direction and thrust of the ABA's forfeit- 
ure policies are fully consistent with the type of procedural reforms outlined in H.R. 
1916, and both represent an effort to balance the utility and benefits of civil forfeit- 
ure against the harms and potential abuses which may occur under current federal 
law. 

Hence, while the ABA has not formally endorsed every provision of H.R. 1916, it 
has supported the call for reform, and has urged Congress to consider remedial leg- 
islation in several of the areas covered by H.R. 1916, which will be further ad- 
dressed below. Especially where, as here, many of the Act's important reforms are 
long overdue, this Committee should not allow the potential oi comprehensive re- 
form to delay the implementation of reforms which enjoy a broad consensus of sup- 
port. 

As the Committee is aware, federal and state law enforcement officials have in- 
creasingly turned to civil forfeitures as a means of combating crime. Under federal 
forfeiture law, however, the government need not establish that the owner of the 
property is a criminal. Rather, the government can civilly forfeit personal property 
by merely showing probable cause to believe that the property was used unlawfully 
by anyone. Because of this low threshold of mere "prooable cause," the government 
can civilly forfeit private property through use of inadmissible hearsay and with evi- 
dence that would otherwise only justify an allegation of criminality, not proof of 
criminality. Indeed, it is estimated that approximately 80% of all property owners 
who lose property to civil forfeitures have not been charged with a crime. Fishman, 
The Agenda Before Congress. 39 N.Y.L.S. L. Rev. 121, 129 (1994). 

The attractiveness oi civil forfeitures to law enforcement officials is understand- 
able because current federal law relieves the government of the traditional stringent 
burdens imposed to secure a criminal forfeiture in a criminal trial. Thus, almost by 
definition, tne civil forfeiture laws permit the government to forfeit the property of 
owners who are not criminals. 



259 

Indeed, the Supreme Court recently emphasized this fact in the case of Bennis 
V. Michigan, 116 S. Ct. 994 (1996), in which the Court held that the Due Process 
Clause does not prohibit the forfeiture of the property of wholly innocent persons. 
In so holding, the Supreme Court has highlighted the essential role that Congress 
must now play in reforming the civil forfeiture laws so as to mitigate the harms 
they cause innocent citizens. When innocent citizens are the authorized subject of 
government confiscatory practices, Congress can fairly ask what public policy is 
being served by such an unjust result. More to the point, when such an unjust re- 
sult is possible. Congress is appropriately concerned with insuring that the proce- 
dures and standards which govern the imposition of civil forfeitures are geared to- 
ward preventing, rather than facilitating, such an undesirable outcome. The legisla- 
tive history of H.R. 1916 indicates that this is one of its objectives, and the ABA 
is fully in accord with this objective. 

The federal civil forfeiture laws date back to the early days of our country, when 
civil forfeiture was a tool used against piracy and customs violations, and the proce- 
dures used to implement civil forfeitures were both limited and harsh. The decision 
of Congress in 1978 to extend these antiquated and narrowly tai^eted laws to the 
modem arsenal of federal law enforcement undoubtedly strengthened the hand of 
the government, but Congress has not yet attempted to reconcile the broad modern 
day role of civil forfeiture with its historically limited focus and scant procedural 
protections for property owners. As a result, some federal courts have voiced concern 
over the "government's increasing and virtually unchecked use of the civil forfeiture 
statutes and the disregard for due process that is buried in those statutes." United 
States V. All Assets of Statewide Auto Parts. Inc., 971 F.2d 896, 905 (2nd Cir. 1992). 

The provisions of H.R. 1916 ofTer an important first step toward restoring a bal- 
anced use of the civil forfeiture laws. In particular. Congress should abandon the 
probable cause standard for justifying civil forfeitures, a standard which links fed- 
eral law to the inquisitorial systems of the distant past, in favor of bringing civil 
forfeitures into the light of the adversary system of justice, where the government 
can prevail only with proof, not mere allegations. 

The implementation of fair civil forfeiture procedures will not only restore the nec- 
essary balance between the government and property owners essential to obtain just 
results, it will also help restore public confidence that the civil forfeiture laws can 
and will be fairly deployed to fight crime, and not merely to further fiscal interests. 
Public skepticism about government motives for civil forfeitures has a long history 
in this country, dating as far back as the celebrated defense of John Hancock's 
schooner Liberty against British forfeiture claims by Boston attorney John Adams. 
Especially where, under the federal forfeiture system, the Justice and Treasury De- 

fiartments are the fiscal beneficiaries of civil forfeitures, the public perception of a 
air forfeiture process remains important today. Indeed, the Supreme Court has 
noted the government's financial stake in the outcome of civil forfeiture proceedings 
as a reason for providing due process to property owners. United States v. James 
Daniel Good Real Property, 114 S. Ct. 492, 502 (1993), and Congress should follow 
suit. The ABA recommends that Congress act now to enact such an Act. 

II. H.R. 1916 CONTAINS SEVERAL PROVISIONS ENDORSED IN PRINCIPLE BY THE ABA 

The Civil Asset Reform Act is a short act, and it does not purport to address every 
civil forfeiture issue which has been a source of public or judicial concern. The ini- 
tial section of the Act identifies its title, the final section indicates its prospective 
application, and the balance of the Act consists of only seven other sections. Of these 
seven sections, all but one section deal with procedural issues affecting the process 
of imposing a civil forfeiture, and all of these sections constitute efforts to make the 
civil forfeiture process more fair to property owners. Hence, broadly speaking, the 
Act is fully consistent with present ABA policy in that their mutual focus has been 
on improving the procedural fairness with which civil forfeiture claims are adju- 
dicatea. 

The sole substantive provision of the Act is section 8 which simply clarifies the 
intent of Congress that the innocent owner exemption ^ of 21 U.S.C. 881(a) be con- 



1 While section 8 addresses what is commonly known as the "innocent owner" exemption or 
defense to civil forfeitures, in reality the exemption does not protect those "innocent of crime" 
in the sense that the government has failed to prove the prop>erty owner's guilt of a crime. As 
courts have noted, "Defenses to a [civil] forfeiture action are . . . limited, and stand in stark 
contrast to those available to a criminal defendant." United States v. One 1985 Mercedes, 917 
F.2d 415, 419 (9th Cir. 1990). The innocent owner exemption merely protects from civil forfeit- 
ure those property owners who can sustain their burden of proving that they lacked knowledge 

Continued 



260 

strued broadly to exempt property owners from civil forfeiture who either lack 
knowledge of the criminal misuse of their property or withhold consent to its unlaw- 
ful use. Some courts have construed the existing civil forfeiture statutory language 
in that fashion, see. e.g.. United States v. One 1973 Rolls Royce. 43 F.3d 794, 816 
(3d Cir. 1994); United States v. 141st St. Corp by Hersh. 911 F.2d 870, 878 (2d Cir. 
1990), although some courts have required property owners to prove that they 
lacked both knowledge of the offending use and refused consent. See United States 
v. Lot 111-B. 902 F.2d 1443, 1445 (9th Cir. 1990). 

Section 8 of the Act would end any remaining judicial confusion on the matter, 
and would direct courts to exempt from forfeiture the property of those who did not 
consent to its unlawful use. This result might be justified on the grounds of promot- 
ing uniformity in statutory construction alone, but it also serves the dual purpose 
of affording broader protection of property owners from civil forfeiture. The ABA's 
Statement of Principles has endorsed more uniform statutory language covering in- 
nocent owner defenses, although the ABA has not adopted any particular policy on 
the proper construction of the existing language of 21 U.S.C. §881.^ 

The remaining sections of the Act address procedural fairness issues. The most 
important section. Section 4, would squarely place the burden of proof on the gov- 
ernment to justify a civil forfeiture by clear and convincing evidence. This proposal 
would be a substantial change from the status quo, as the government currently can 
obtain a civil forfeiture judgment by means of only establishing probable cause to 
believe that the property was connected with a crime — an evidentiary standard tra- 
ditionally sufficient only to justify accusations, not a judgment, and one which can 
be established through wholly inadmissible evidence. See. e.g. United States v. One 
1986 Chevrolet Van, 927 F.2d 38, 42 (1st Cir. 1991); United States v. One 1987 Mer- 
cedes 560 SEL. 919 F.2d 327, 331 (5th Cir. 1990). 

The ABA has endorsed placing the burden of proof upon the government, and has 
supported the preponderance of the evidence standard. See United States v. $12,390. 
956 F.2d 801, 807 (8th Cir. 1992) (Beam, J., dissenting) (contending that current 
probable cause standard for civil forfeitures violates due process). The Act's adoption 
of the higher "clear and convincing" burden of proof is not unprecedented, however, 
as this standard has been endorsed by the New York legislature, and the Florida 
Supreme Court has interoreted Florida's constitution as mandating no less a burden 
of proof See N.Y. Civ. Prac. L & R. 1311(3) (McKinney Supp. 1994); Department of 
Law Enforcement v. Real Property. 588 So.2d 957, 967 (Fl. 1991). 

Section 3 would change the current 10 day period provided by the Supplemental 
Admiralty Rules for property owners to make a forfeiture relief claim to a 30 day 
period. This small reform will have a broad practical impact, as the current ten day 
period in which to file claims (or suffer their loss) is a totally inadequate period for 
claimants to investigate their alternatives, obtain counsel, and file a claim against 
the federal government. Here again, the Act attempts to improve the procedures 
available to aggrieved property owners so as to improve the likelihood that forfeit- 
ure issues willbe resolved on their merits rather than on the basis of technicalities. 
The ABA has specifically urged Congress to extend the current time period for filing 
civil forfeiture claims, although it has not endorsed any specific longer time period. 

The Act contains three other sections addressing proceaural fairness issues. Sec- 
tion 2 amends the Federal Tort Claims Act to m£uce clear that the federal govern- 
ment is financially responsible for property damages caused by the negligent han- 
dling of seized property by government ofTicials. Section 5(b) provides that indigent 
property owners can obtain the services of court-appointed counsel to defend their 
seized property, at rates provided for indigent criminal defense counsel under the 
Criminal Justice Act (18 U.S.C. 3600) and taxes the cost of providing this legal rep- 
resentation against the Justice Department's Asset Forfeiture Fund. Finally, Section 
6 of the Act would provide federal courts with the discretion to release property 



of, or failed to consent to, the criminal use of their property, regardless of whether the owner 
is herself guilty of any criminal conduct. 

* Section 8(b) of the Act is an apparent attempt to codify and extend the "willful blindness" 
language of the current 21 U.S.C. 88 l(aX4XC), but then confuses matters somewhat by simulta- 
neously defining "consent" as including the failure to take reasonable steps to prevent the pro- 
scribed use. The net result of combining these distinct limitations on the "knowledge" defense 
and the "consent" defense in section 8(b) is to risk a judicial interpretation that a claimant must 
prove both a lack of willful blindness (to establish the knowledge defense) and due diligence (to 
establish the consent defense) in order to qualify for any innocent owner exemption. Hence, sec- 
tion 8(b) could easily be used to undermine section 8(a)'s declaration that either knowledge or 
lack of consent justify civil forfeiture relief This risk can be avoided by simply separating out 
section 8(b)'8 two definitions, and make clear that the willful blindness definition applies only 
to the lack of knowledge exemption, and the due diligence requirement applies only to the lack 
of consent exemption. 



261 

seized for civil forfeiture proceedings prior to trial in order to prevent a substantial 
hardship to the claimant. The ABA does not currently have a formal policy address- 
ing these types of procedural changes. 

CONCLUSION 

The ABA fully supports the need for civil forfeiture reforms, and recommends that 
Congress take action to make the existing civil forfeiture laws more fair and equi- 
table to property owners. The Civil Asset Forfeiture Reform Act, H.R. 1916, is al- 
most exclusively aimed at the area of current civil forfeiture law most in need of 
reform — improving the procedures by which innocent property owners are given a 
chance to protect their property from government confiscation. The Act's general 
preference for giving American property owners a fair chance to vindicate their 
property from government confiscation is consistent with existing ABA policy, and, 
accordingly, the ABA supports enactment of the Act. 



EXHIBIT A 

American Bar Association Criminal Justice Section Report to the House of 

Delegates 

recommendation 

RESOLVED, That the American Bar Association urges that federal asset forfeit- 
ure laws be amended to comply with the attached "Statement of Principles on the 
Revision of the Federal Asset Forfeiture Laws," dated November 11, 1995. 

statement of principles on the revision of the federal asset forfeiture 

LAWS 

(November 11, 1995) 

1. Uniformity and simplicity. The statutory procedures regarding administrative, 
civil and criminal forfeiture are mutually inconsistent and unnecessarily complex. 
In revising these statutes. Congress should simplify the procedures and make tnem 
as uniform as possible. 

2. Terms used to describe what is forfeitable. Likewise, the statutoTy language de- 
scribing what property is subject to forfeiture should be amended to avoid use of 
confusing and inconsistent terms such as "proceeds," "gross receipts" and "gross pro- 
ceeds" in favor of uniform, well-defined terms. 

3. Innocent owner defense. Congress should enact a uniform innocent owner de- 
fense applicable to all civil and criminal forfeitures. 

4. Forfeiture as a law enforcement tool. The seizure and forfeiture of the proceeds 
and instrumentalities of criminal acts is an important and appropriate tool of fed- 
eral law enforcement. Congress should encourage the continued use of both civil and 
criminal forfeiture not only to deter and diminish the capacity of the criminal to 
commit future criminal acts, but to provide a means of restoring criminal proceeds 
to victims. 

5. Burden of proof. Civil forfeiture statutes should be amended to provide that the 
government bears the burden of proof regarding the forfeitability of property at 
trial. That is, the government should be required to prove, by a preponderance of 
the evidence, that the crime giving rise to the forfeiture occurred, and that the prop- 
erty bears the required relationship to the ofTense. 

6. Time limits. To enhance the ability of property owners to contest forfeiture ac- 
tions. Congress should extend and maJte uniform the time limits for filing claims 
in civil and administrative forfeiture proceedings. 

7. Third party interests in criminal cases. Congress should amend the provisions 
of the criminal forfeiture statutes regarding pre-trial restraining orders to provide 
a mechanism for addressing the interests oi third parties in a timely manner that 
does not unduly interfere with the criminal trial. 

8. Attorneys fees. The civil and criminal forfeiture statutes should contain a mech- 
anism by which the court may make an early determination as to whether seized 
or restrained property may be made available to a criminal defendant to pay attor- 
neys fees. 

9. Restraint of substitute assets. If Congress provides for the pre-trial restraint of 
substitute assets in criminal cases, it should exempt assets needed to pay attorneys 
fees, other necessary cost of living expenses, and expenses of maintaining the re- 
strained assets. 



262 

10. Forfeiture of criminal proceeds. No person has a right to retain the proceeds 
of a criminal act. Accordingly, Congress should provide for the civil and criminal for- 
feiture of the proceeds of all criminal offenses, and it should authorize the govern- 
ment to restore forfeited property to the victims of the offense. In particular, this 
change in the law will eliminate the risk of overuse of the money laundering statues 
to forfeit proceeds and restore property. 

11. Scope of criminal forfeiture. To avoid the necessity of filing and defending suc- 
cessive criminal and civil forfeiture proceedings arising out olthe same course of 
conduct when property is held jointly by defendants and non-defendants. Congress 
should provide a mechanism for adjudicating the forfeitability of the non-defendants' 
interests in the forfeited property as part of the ancillary proceeding in criminal 
cases. 

12. Facilitating property. When projperty used to facilitate the commission of a 
criminal offense is made subject to forfeiture. Congress should enact a standard de- 
fining the required nexus between property and the offense. 

13. Availability of criminal forfeiture. Current law outside of the drug enforcement 
context requires the government to bring most forfeiture actions as civil actions. The 
statutes should be amended to give the government the option, in all instances 
where civil forfeiture is presently authorized, of bringing a criminal forfeiture action 
as part of the criminal indictment in accordance with the standard rules for crimi- 
nal forfeiture. 

Mr. Hyde. Mr. Kappelhoff. 

STATEMENT OF MARK J. KAPPELHOFF, LEGISLATIVE COUN- 
SEL, ON BEHALF OF THE AMERICAN CIVIL LIBERTIES 
UNION 

Mr. Kappelhoff. Thank you, Mr. Chairman. On behalf of the 
American Civil Liberties Union, thank you for inviting me to share 
our comments with you regarding civil asset forfeiture laws and 
their need for reform. 

Imagine for a moment, living in a society where a citizen is pre- 
sumed to be guilty and innocence must be proven, where you, 
members of your family, and your property and possessions can be 
seized almost at the whim of the Grovernment, where you can be 
punished before having a trial, where the punishment imposed is 
oftentimes in excess of the nature of the actual offense, and where 
you are left legally helpless because you do not have the right to 
an attorney and the court is under no obligation to provide you an 
attorney. 

Surprisingly, that imaginary society actually exists. It is the 
United States under the civil asset forfeiture laws. Although the 
parade of horribles I just listed clearly violate some of the bedrock 
constitutional doctrines upon which our Nation was founded, under 
the current civil asset forfeiture laws in our country, these abuses 
are all too commonplace. 

Mr. Chairman, it is time to end these abuses by overhauling the 
civil asset forfeiture system in our country and restore to the 
American people the fundamental rights and liberties that are en- 
shrined in our Constitution. 

I would like to take a moment to commend Chairman Hyde, for 
your leadership and longstanding commitment to reforming civil 
asset forfeiture in our country. You began this legislative journey 
back in 1993 with the assistance of the ACLU and NACDL. We 
commend your efforts to pursue the reform that is so desperately 
needed in this area. 

I would like to take a moment and describe some of the problems 
with asset forfeiture and then go into the bill. It is not surprising 
that civil forfeiture has been especially attractive to law enforce- 



263 

ment authorities because success demands very little in the way of 
proof or connection to actual wrongdoing. 

Civil asset forfeiture originally was championed by law enforce- 
ment officials as a powerful weapon to fight the war on drugs. In- 
deed, it was thought of as some form of poetic justice, seizing the 
assets of major drug traffickers and using these assets to fund le- 
gitimate law enforcement initiatives. However, as a result of the 
ease with which law enforcement authorities are able to secure for- 
feitures, the use and abuse of forfeiture has soared. Unfortunately 
in their zeal, law enforcement agencies that have turned civil for- 
feiture into a nightmare come true for thousands of ordinary people 
who have minor brushes with the law or who are completely inno- 
cent of any wrongdoing. Tragically, scores of innocent citizens and 
the Constitution have become casualties in this "war." 

Probably the most troubling abuse in the forfeiture system re- 
garding the victims involves the victimization of minorities through 
the use of racially based criteria to unlawfully and disproportion- 
ately target and stop African-American and Hispanic travelers. As 
you heard this morning, Willie Jones, an African-American 
landscaper, had the misfortune of experiencing this humiliation. He 
supposedly fit a so-called drug courier profile; that is, an African- 
American paying for a round-trip airline ticket with cash. Unfortu- 
nately, Mr. Jones's plight is not that unusual. There appears to be 
extensive use of racially based profiles to determine law enforce- 
ment targets. 

For example, cited in your book in the case U.S. v. Taylor, in the 
Memphis Airport 75 percent of air travelers stopped were black; 
yet African-Americans amounted to only 4 percent of the flying 
public. In the Pittsburgh Press, it is reported that with the forfeit- 
ure of money and no drugs, 77 percent of those individuals involved 
were African-Americans, Hispanic, and Asian motorists. 

Further abuse is found in what is sometimes described as law 
enforcement extortion. This involves the practice of offering out of 
court cash settlements to otherwise innocent or minimally culpable 
individuals whose property is seized in exchange for return of their 
property. Debra V. Hill's case illustrates this practice in action. She 
and her family were guests in a house that police raided. During 
the raid, the police discovered a small amount of methamphet- 
amine in a box of clothing that did not belong to her. The police 
confiscated the $550 in her possession. She was so desperate for 
the cash that she agreed to forfeit $250 of this money to the pros- 
ecutor in return for the remaining $300. When the charges against 
her were dropped, she did not receive the balance of her money. 

A final problematic area that needs to be looked into is the lucra- 
tive business of asset forfeiture that has created a strong incentive 
or temptation for law enforcement officials to pursue assets at the 
expense of pursuing convictions. The extensive use of civil forfeit- 
ure by Federal and State law enforcement authorities has led to 
the confiscation of billions of dollars in drug assets. 

All the money and properties seized by State and Federal offi- 
cials is deposited back into the budgets of the seizing agencies. 
What was originally seen as a means of forcing criminals to pay for 
their own apprehension and legitimate law enforcement initiatives 
has become an incentive for local, State, and Federal officials to 



264 

seize property and then to auction justice to the highest bidder. As 
a result, major drug dealers are allowed to barter their way out of 
lengthy prison terms by prosecutors who have become intoxicated 
with the thought of huge sums of money to be obtained from drug 
forfeiture assets. Conversely, low level drug users with no assets or 
no information to swap are exposed to the full wrath of the harsh 
drug laws — mandatory minimums and nonparoleable sentences. 
These laws were specifically designed for the worst drug offenders. 
Unfortunately, they have been unleashed upon the least culpable. 

Last fall, two investigative reporters from the Boston Globe un- 
covered the distressing truth about this practice in action in the 
State of Massachusetts. What they found in reviewing the major 
drug trafficking cases in which $10,000 or more was forfeited, 75 
percent of the drug dealers ended up charged with either lesser 
crimes or were allowed to plead to lower sentences. Some even re- 
ceived no time in jail. These statistics indicate that crime in fact 
may pay. All you need to do is forfeit the right amount of assets 
to obtain your get-out-of-jail-free card. 

But, once again, it seems that the poor actually pay the greatest 
price under forfeiture laws with their liberty and their property. 

To be sure, the abuses discussed clearly make the case for civil 
asset forfeiture reform. We endorse the provisions of H.R. 1916, but 
I would like to highlight legislation that we ask to be enacted into 
law. 

The most important provision is shifting the burden of proof to 
the Grovernment and the fact that they should prove it by a clear 
and convincing evidence standard. Under current law, the Grovern- 
ment is simply required to meet its low standard of proof, probable 
cause that the property is subject to forfeiture. 

The second aspect of H.R. 1916 is the innocent owner defense. 
This provision specifically provides for the protection of owners 
from civil forfeiture if they can show that either they had no knowl- 
edge of the criminal misuse of their property or that they consented 
to the illegal activity. The ACLU believes that this provision would 
provide additional protection for innocent property owners and en- 
sure uniform enforcement of forfeiture laws. 

The third aspect and we believe a critical aspect of the legislation 
is providing for the appointment of counsel for indigent defendants. 
This provision breathes meaningful life into the entire body of the 
legislation. Without it individuals are simply left helpless in a com- 
plex web of forfeiture laws. Examples this morning that we heard 
showed exactly why this is critical. Mr. Jones would have had no 
ability to obtain his assets except for Mr. Edwards' fine work and 
other individuals that have the same plight. 

Since the civil forfeiture system can be as punitive as the crimi- 
nal system, it is essential that those exposed to either system re- 
ceive legal counsel to protect their rights and liberties. The ACLU 
believes that this provision is absolutely essential in order to en- 
sure that individuals can avail themselves of the other reforms con- 
tained in H.R. 1916. 

I am at a loss to determine why the Grovernment opposes the 
right to counsel in the legislation. The Department of the Treasury 
mentioned today they oppose the right to counsel provision. The 
only common-sense proposal consistent with preserving fundamen- 



265 

tal rights and liberties is the right to counsel. It only makes the 
system fair and will prevent injustices. Could it be that 80 percent 
of these cases go uncontested and the right to counsel would make 
this statistic lower, or that the funding for these lawyers comes out 
of the proceeds that the Government has been seizing? 

I would like to quote what Justice Black mentioned in Gideon v. 
Wainwright: "Any person haled into court, who is too poor to hire 
a lawyer, cannot be assured a fair trial unless counsel is provided 
for him." I believe that provision should be applicable to civil asset 
forfeiture. 

We support H.R. 1916 and urge its adoption. Civil forfeiture as 
a whole stands outside the doctrines of due process and criminal 
procedure. Despite the widespread use and misuse of civil forfeit- 
ure, it is an arcane legal doctrine which exists merely because of 
its historical foundation and its fiscal advantage to law enforce- 
ment agencies. 

While promoted as a civil cause of action, its ramifications are 
more akin to the harsh punitive aspects associated with the crimi- 
nal system, without any of the important fundamental constitu- 
tional protections for civil rights and liberties. This leaves many 
citizens unprotected from law enforcement's overzealous and 
unencumbered use of these laws. 

As stated earlier, the ACLU believes that all civil forfeiture 
schemes should be abandoned. However, we do support H.R. 1916 
and other meaningful reform efforts which would mitigate the 
harshness of ci\al asset forfeiture and incorporate principles of due 
process. 

We look forward to working with you and your staff in fashioning 
the appropriate legislation. Thank you. 

Mr. Hyde. Thank you, Mr. Kappelhoff. 

[The prepared statement of Mr. Kappelhoff follows:] 



266 

Prepared Statement of Mark J. Kappelhoff, Legisijvtive Counsel, on Behalf 
OF THE American Civil Liberties Union 



INTRODUCTION 

Mr. Chairman and Members of the Judiciary Committee. On behalf of the Amencan Civil 
Liberties Union, thank you for inviting me to share our comments with you regarding civil asset 
forfeiture laws and their need for reform. 

Imagine for a moment, living in a society where an individual is presumed to be guiln. and 
innocence musi be proven, where you. members of your family, and your propern and possessions 
can be seized at the whim of the government, where you can be punished before e\ en haxing a trial, 
where the punishment imposed is often times in excess of the nature of the actual otTense and where 
you are left legally helpless because you do not have the right to an attomey, cannot afford one in any 
e\ ent. and the court is under no obligation to provide you an attomey. 

Surprisingly, this imaginary society actually exists: it is our own - The United States of 
.■\menca. Although the parade of horribles that I just listed clearly violate some of the bedrock 
constitutional doctrines upon which our nation was founded, under the current ci\ il asset forfeinire 
laws in our countn . these abuses are all too commonplace. Mr Chairman, it is time to end these 
abuses by overhauling the civil asset forfeiture system in our country and restore to Amencan 
citizens the fundamental nghts and liberties that are enshnned in our Constitution 

The .ACLU believes that all civil forfeiture schemes inherently violate fundamental 
constitutional nghts. including the nght not to be depnved of property without due process of law 
and the nght to be tree from punishment that is disproponionate to the offense While we belie\e 



267 

the practice ofciMi tbrteiture should be abandoned, we support meaniniitul reform etTons which 
would miiiiiaie its harshness and incorporate equitable provisions and pnnciples of due process. 
H.R. 1 9 1 6 addresses many of our concerns and takes an important first step that is long overdue This 
bill would reform forfeiture proceedings to provide property owners with some significant 
procedural protections. It would also make it more difficult for government to confiscate the 
property of innocent owners - people who were not aware of or did not consent to. any illicit activir> 
m connection with their propert>'. These reforms are badly needed because innocent propertx- 
owners, or those who have commirted only minor infractions are now subieci to draconian 
punishments and property depnvations with rather limited constitutional or procedural protections. 
Because of these and other imponant procedural protections it provides, the .ACLU endorses this 
legislation and urges Congress to pass the Civil Asset Forfeiture Reform Act this year. 

I would like to commend Chairman Hyde for his leadership and long standing commitment 
to reforming civil asset forfeiture in our country. Mi Chairman, you began this legislative journey, 
with the support of the American Civil Liberties Union and the National Association of Cnminal 
Defense Lawyers, back in 1993 with the introduction of the H.R. 2417. the ""Asset Forfeiture Reform 
Act of 1993 " You followed this up by making a powerful case for civil asset forfeiture reform m 
your book in which you documented and exposed many of the abuses within the asset forfeiture 
svstem It IS now nme to finish the izood work vou stoned. 



■Vfi' Henn. 1 Hsde. ! •riciiiiif^ Yniii I'mperiv lii\:his Is Yniir I'rnficrn Scih' hriim Sfiiiirc ' i 1'3Q5) 



268 



PROBLEMS WITH CIVIL ASSET FORFEITIRE 

The roots of civil forteiture can be traced back to medieval England uherc kinys used the 
procedure to seize the propern of disloyal nobles. The Amencan model tor cnil tbneiture dates 
back to the eighteenth-century where forfeiture laws were used to combat piracN and customs 
violations. Under this system, courts permitted the government to seize the offending ship as a cimI 
remedx . rather than requiring cnminal prosecution of the owners. These owners were usually not 
Amencan and difficult to locate for cnminal prosecution. Thus, permitting the government to 
proceed against the vessel under a civil forfeiture action, the government could punish an owner tor a 
cnme with mmimal evidence and without any of the constitutional protections atforded a cnminal 
defendant. 

The modem era of civil asset forfeiture flows from these same archaic legal concepts. It is 
based on the legal fiction that inanimate objects may be found guilty and condemned. Thereb> . the 
object or property is subject to seizure and forfeiture to the government. Pursuant to this construct 
the guilt or innocence of the owner is irrelevant, because the forfeiture action is against the "object" 
not the "owner "" In fact, no cnminal arrest or conviction is even necessary to subject property to 
forfeiture. Government authonties must simply satisfy a requirement of probable cause that the 
property was used in an illicit activity or was purchased with funds from illicit activity in order to 
subiect the property' to forfeiture. As a result, civil forfeiture constitutes a dangerous, collateral 
weapon for law enforcw-ment agencies where criminal convictions are more difTicuit to come b\ 

The protound inequirv of civil asset forfeiture system is exemplified b\ the distinction 
between cnminal and cimI forteiture. Cnminal forfeiture is imposed in a cnminai proceeding 
directed aiiainsi an mariiluul for his or her aliened misconduct While a defendant in a cnminal 



269 



forfeiture prosecution is entitled to all the constitutional and procedural protections associated with 
the cnminal process, a person facing civil forfeiture, on the other hand, receives none of the 
constitutional safeguards associated with the doctnnes of due process and cnminal procedure. 

The irony and unfairness created under this system is worth illustrating. A major drug 
trafficker prosecuted under criminal forfeiture statutes is correctly afforded all of the due process and 
constitutional protections go\eming the forfeiture of their property. Whereas, an innocent 72 \ear 
old grandmother, whose grandson, without her knowledge, allegedly makes a drug sale from her 
from porch is subject to losing her home and possessions without the benefit of indicnnent. heanng. 
tnal. or any other constitutional or procedural protection - not even the right to counsel " 

Not surpnsingly. ci\il forfeiture has been especially attractive to law enforcement authorities 
because success demands ver>' little in the v«iy of proof or connection to actual wrong. Civil asset 
forfeiture originally was championed by law enforcement officials as a powerful weapon to fight the 
"war on drugs." Indeed, it was thought of as some form of poetic justice: seizing the assets of major 
drug traffickers and using these assets to fund legitimate law enforcement initiatives. However, as a 
result of the ease uith which law enforcement authorities are able to secure forfeitures, the use and 
abuse of forfeiture has skyrocketed. In some localities, it is being used against e\erylhing fi-om drugs 
to drunk dnving to prostitution. Unfortunately, in their zeal, law enforcement agencies have turned 
civil forfeiture into a nightmare come true for thousands of ordinary people who have minor brushes 
with the law or who are completely innocent of wrongdoing. Tragically, scores of innocent citizens 
and the Constinition have become casualties in this "'war "" 



270 



While civil tbrteiture proceedings have been held not to require the fundamental protections 
essential to a cnminal proceedins.'. they are nevenheless penal. Indeed, the Supreme Court has 
recognized that in certain circumstances civil forfeiture may be punitive in nature and thas regulated 
bv the Excessive Fines Clause of the Eighth Amendment.^ The legal fiction that surrounds ci\ il asset 
forfeiture provides no comfort for those individuals who find themselves exposed to the harsh 
penalties associated with the cnmmal system without any of the fundamental constitutional and 
procedural protections inherent to the cnminal justice system. 

.ABISES IN CIML ASSET FORFEITURE: THE V KTIMS 

The limited constitutional protections for individuals subjected to civil forteimre laws 
coupled with unbridled, permissive law enforcement authority, creates a civil forfeiture system that 
is npe for abuse. Particularly appalling is the list of cases documenting the disproportionate 
victimization of minorities through the use racially based criteria to unlawfiilly target and stop 
African-American and Hispanic travelers. Willie Jones, an African American landscaper. had the 
misfortune to expenence this humiliation. He had S9600 in cash seized fi^om him at the NashMlle 
airport simply because he fit a so called "drug courier profile" - that is, an African American paying 
for a round-tnp airline nckei with cash He acixially planned to use the money to by landscape 
materials. UnfonunateK. Mr Jones" plight is not that unusual Several investigative media repons 



■ Illustration is based upon a real ca>e documented in the statement of James Hovle. submitted to the House 
Commmee on Government Operarons. Legislation and National Secumv Subcommittee. Re The Federal Asset 
Forfeiture Program. Sepiember .'" . '.•^'^Z 

\Scl: I'..','.. Austin \ I- niied '^taie> . ' 1.' S Cl 2801 (1993). Mexander \ L niied Siaieb . I IT- S Cl I'hoi !99.^i 
' .Andrew Schneider & Man P Fiinerty. I )nif: .■ijieni.^ iur Mon: Likely m Sio/> Miiioiiik-s. Pitt Press. Auu I ;.. 
1991. at .M 



271 



have chronicled and exposed how civil forteiiure is panicuiarly harsh on minonties as a result otthe 
extensive use of racially based profiles to determine law enforcement targets. " 

Further abuse is found in what is sometimes described as law enforcement extortion This 
involves the practice of offenng "out of court" cash settlements to otherwise innocent or minimalK 
culpable individuals whose propertv- was seized in exchange for a return of their propert\ Debra V 
Hill's case illustrates this practice in action. She and her family were guests m a house that police 
raided. During the raid, the police discovered a small amount of methamphetamine m a box oi' 
clothing that did not belong to her The police confiscated the S550 in her possession She wa.-- so 
desperate for the cash that she agreed to forfeit S250 to the prosecutor in return for the remaining 
S300 WTien the charges against her were dropped, she did not receive the balance of her monev 
And there is the case of Kevin Perry, a gravel pit laborer from Ossipee, New Hampshire. After he 
and his wife pleaded guilty to the misdemeanor of growing four marijuana plants, the United Sutes 
sought to forfeit their mobile home, worth $22,000. Following a fifteen-month battle to avoid 
homelessness. the government finalK agreed to remm the home for S2500. In order to pav the 
S2500. Vlr. Perrv' had to take out a loan to be repaid at a rate of S 1 55.63 a month. ' 

Finally, the lucrative business of asset forfeiture has created a strong temptation for law 
enforcement officials to pursue assets at the expense of pursuing convictions The extensive use of 
civil forteiture by federal and state law enforcement authorities has led to the confiscation of billions 
of dollars in drug assets All of the money and propertv' seized by state and federal officials is 



' Sce.c.:. SteveBem & JeffBraz:: /wiiicii i\i^ln>r hi^v \/«wr ' ORL.WDO SEMINEL, June U. '•3^:. nt A- 

I. 'iiiftia noie .'v see also ^tli Mimnc^ Yon i\- I luLr Anc\i tCBS teleMsiiin broadcast. .Apr 5 I'^'^^i 

' ( /rei:i'nutii. June 2'^. I '■'"30. p D-J 

' I'SA f,H.hn. May IS. l'>9:. pp. i A. 7A 



272 



deposited back into the budyets of the seizing agencies. What onginalK was seen as a means or' 

tbrcint.' cnminals to pay for their own apprehension, has become an mcentne for local, state and 

federal officials to seize properr.- to auction justice to the highest bidder. As a result, major druL' 

dealers are allowed to baner their way out oflengthy prison terms by prosecutors who ha\e become 

preoccupied with huge sums of money to be obtained from drug forfeiture assets Conversely, low 

le\el druL' users, with no assets or information to swap, are exposed to the full wrath of the harsh ;, 

drug laws. specitlcalK designed over the past decade for the worst drug offenders Last fall, mo ■ 

reponers from the Hiision dlohc uncoxered the distressing truth about this practice in action m 

I 
Vlassachusens The\ compared the distinctlv different experiences of Rachel .Ace\edo and Stephen 

I 
Fenderson Rachel Acevedo. a 2^-year-old mother of three, is currently serving a ten \ear mandaion ^ 

sentence, without the possibility of parole. She was prosecuted along with her former boyfriend for 

selling four ounces of cocaine to an undercover drug officer. The boyfriend fled before tnal, leaving 

Ms. Acevedo the lone target for the prosecutors. Stephen Fenderson, on the other hand, had his 

home raided by police, where they found 23 bags of cocaine, a loaded illegal shotgun, ammunition. 

and other drugs hidden throughout the house. All tolled, these offenses would normally subject him 

to a mandatory sentence of fifteen years in pnson. This did not occur Mr Fenderson forfeited 

S425.000 in drug money, and is a free man today after serving only 2 Vi years." It seems that cnme 

does pa\ if you can actually afford to pay 



' Dick I.ehr .v Bnice Biiiiertieid. ^nnill-lf-ncrs i ,ci Hurt/ ! imc THE B()STO\ GLOBF. Metro p I (September ; 

100>l 



273 



REFORMING CIVIL ASSEST FORFEITIRE: ANALYSIS OF H.R. 1916 

To be sure, the abuses discussed above clearl\ make the case for civil asset forteiture reform 
The current law of civil forfeiture borders on the Medieval: it allows law enforcement authonties 
full discretion to confiscate any and all cash and property based upon mere suspicion of wrong 
doing; owners of such money and property are not entitled to appointed legal counsel: unjust 
procedural barriers such as an unreasonable short time limits to contest a seizure and the requirement 
that a propert\' owner post a bond in order to contest the seizure often times bar recover\'; and the 
uncharged and completely innocent are presumed guilrv in coun because the burden of proof is on 
the individual whose property is being seized. H.R 1')I6. the Civil Asset Forfeiture Reform Act 
represents a beginning in the reform of these civil asset forfeiuire laws. 

Possibly the most important provision in H.R. 1916, places the burden of proof on the 
government to prove that property it has seized was subject to forfeiture by clear and convincing 
evidence. Under current law, the government is simply required to meet its low standard of proof - 
probable cause that the property is subject to forfeiture - then the burden shifts to the property owner 
to prove either the "properties innocence." or that the owner did not know and did not consent to the 
property's illegal use. " The governments probable cause burden, in reality, means only slightly 
more than a hunch and far less than what is necessar> to prove guilt in a criminal coun It is 
commonplace to have a seizure and forfeiture of money and property based solely on hearsay 
"evidence" that is deemed too unreliable to be admissible in most other judicial proceedings These 



' This .standard has been adopted in New York and Flonda .Vv. N Y Ci\ Prac L & R Section 131 l(3MMcKinney 
Supp I0Q4 ). Depanmeni of Law Enforcement \ Real Propenv . 58S So :d "57. 067 (Fl lOQU 
'" This IS commonly referred to the innocent owner ' defense uhich requires the owner of seized property to carrv' 
the burden of proving that she did not know and did not consent to the propenys illegal use 2! U S C Sec 881(a) 



274 



burdens, easy on the gosemment, hard on the propert\ owner, often result in the seizure of propert> 
owned by one auainsi whom the government cannot suppon a cnmmai charge An owner can onl\ 
overcome this presumption by proving that he had no knowledge of the illicit activity or did not 
consent to that activity That is, the owner is required to prove a negative. H.R 1916 corrects this 
unfairness by simply restoring fiindaniental due process for property owners by changing these unfair 
evidentiary rules 

Section eight of H.R. 1916 offers a clarification of the 'innocent owner" defense. This 
provision specitlcally provides for the protection of owners from civil forfeiture who neither knew of 
the cnminal misuse of their property nor consented to the illegal activity. Although under this 
codification, an innocent owner would still have the burden of proving his ignorance or non-consent, 
the ACLU believes this provision would provide additional protection for innocent property owners 
and insure uniform enforcement of the forfeiture laws.'' 

H.R. 1916 also provides for the appointment of counsel for indigents. Section five allows 
indigent property owners the opportunity to obtain court-appointed counsel to assist them throughout 
the forfeiture process. Since the civil forfeiture system can be as punitive as the cnminal system, it is 
essential that those exposed to either system receive legal counsel to protect their nghts and libenies. 
The ACLU believes that this provision is absolutely essential in order to insure that individuals can 
avail themselves of the other reforms contained in H.R. 1916 designed to protect their property rights 



' ' Eighty percent of the people who lost property to the Federal szovemment were never chargea with a cnme 
■"Government Seizure \ictimize Innocent." I'lllshiirgh l'res\. August II. IWl 

'■ The Supreme Court s recent confounding decision in Bennis \ Micnman . 1 16 S Ci W4 ( |oom emphasized the 
importance of the innocent owner defense Despite acknowledging that Ms Bennis lacked an\ knowledge that her 
husband had used their jointh owned automobile to engage in cnminal sexual indiscretions with i prostitute, the 
Court permitted ihe forteiture of the automobile 



275 



and liberties Indeed without the right to counsel, the other retbrms ha\e less impact on ret'orming 
the system. 

The ACLU also supports the provisions in H.R. 1916 that improve the unfair procedural 
obstacles that make it difficult to contest forfeitures. First of all. section three of H.R. 1916 extends 
the deadline to contest a government forfeiture from as little as ten days to thirty days. Although we 
would prefer a longer penod of time,' this provision impro\es the extremely short time penod 
currently in effect; thus, reducing the chances that a claimant will miss the deadline for filing a claim 
to recover his propen\-. In addition, the Act also eliminates the need for an owner to pa\ the cost of a 
bond in order to file a claim. The government has smctly enforced these requirements, and has 
permanently deprived owners of their property for any slight non-compliance with them. It also 
would allow for the release of confiscated property if the seizure causes a substantial hardship on the 
owner and a right to sue if confiscated property is damaged through governmental negligence. 



' Chairman Hvde s previous Asset Forfeiture Retbrm \c\. H R 241". provided tor a sixiv dav time penod tor t'llinu 
a claim This would be a preferable time penod 



276 



THE ACLl SUPPORTS ADDITIONAL REFORM MFAStRES 

While the ACLU supports H.R. 1916 and urge its adoption, we belies e additional provisions 
should be added to the bill that would fiirther curtail abuses and protect the ci\ il libenies of citizens. 
Any future forfeiture reform initiatives should include the following measures: 

• A person should be convicted criminally before the government may seize the propert>' involved. 

• The government should be required to conduct an adversanal preliminan heanng pnor to 
seizure. 

• The standard ofproof to support a forfeiture should be be\ond a reasonable doubt 

• There should be a proponionality requirement that only allows for the tbrteiture of propert\ that 
is equal to or less than the cnme. 

• The property seized should be limited to the items used to facilitate the cnminal enterpnse. 

• Asset forfeiture proceeds should be turned over to the general fund to allow for the equitable 
distnbution of the proceeds among governmental agencies. 



277 



CONCLl'SION 

Civil forfeitxire as a whole stands outside the doctrines of due process and criminal 
procedure. Despite the widespread use and misuse of civil forfeiture, it is an arcane legal doctrine 
which exists merely because of its historical foundation and its fiscal advantage to law enforcement 
agencies While promoted as a civil cause of action, its ramifications are more akin to the harsh 
punitive aspects associated with the criminal system - without any of the important fundamental 
constitutional protections for civil nghts and liberties This lea\es man\- citizens unprotected from 
law enforcement's overzealous and unencumbered use of these laws The time is long overdue to 
reform the unfair civil asset forfeiture system. As stated eariier. the ACLU believes that all civil 
forfeiture schemes should be abandoned However, we do support H.R. 1916 and other meaningful 
reform efforts which would mitigate the harshness of civil asset forfeiture and incorporate equitable 
provisions and principles of due process which strengthen the position of a claimant when faced with 
a prospective forfeiture. We believe that Chairman Hyde's proposal is a welcome and important first 
step in this direction. 

We thank you Chairman Hyde for the opponunity to present our comments to your 
Committee today. 



278 

Mr. Hyde. Mr. Edwards. 

STATEMENT OF E.E. (BO) EDWARDS III, ESQ., ON BEHALF OF 
THE NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAW- 
YERS 

Mr. Edwards. Thank you, Mr. Chairman. It is a pleasure to be 
with you today and I rehsh the opportunity to take a nibble on the 
other side of the apple this afternoon. 

There are a couple of comments that I would like to make, but 
then I would try to turn my attention to the DOJ proposal and 
offer you some thoughts and reactions from our side of the aisle, 
as it were, to what the DOJ has brought to you in the last week 
or so. 

I think the proper way to approach forfeiture reform is to recog- 
nize that forfeiture, modern civil asset forfeiture is not fought on 
a level playing field. The laws and procedures as now written are 
structured so the Government will win. There are pitfalls, dead- 
lines, hoops you have to jump through in order to get into court to 
get your case heard, let alone to prevail. So it is easier for the Gov- 
ernment to win. 

Unfortunately, that attitude has not diminished one bit. What is 
going on in modern forfeiture is really not only inconsistent, but it 
is anathema to the role, the high esteem which this country has 
paid to the private ownership of property since its founding, and 
in fact the vital role that it has always played to a democratic soci- 
ety. 

An argument could be made that as much as we like to stand 
up for freedoms that are enunciated in the Bill of Rights, freedom 
of press, freedom of assembly and speech, et cetera, if we didn't 
have private property in this country we probably wouldn't be here 
today with the structure that we have. So I think it is vital that 
the fundamental tenets of private ownership of property be upheld, 
and they are not consistent with modern asset forfeiture. 

It needs to be recognized and it needs to be said that the imposi- 
tion of forfeiture in America in the 1990s has its hardest impact 
on the least of those among us, on the poor, on people who are not 
able to afford a lawyer, on the weak, people who are afraid that 
if they assert themselves against the government there will be re- 
criminations, and upon minorities. 

There are people who cannot leave Austin, TX, and drive to De- 
troit without being stopped, and I am presuming that they observe 
every motor vehicle law and rule of the road that exists. They 
couldn't do it. Why? Because they would be stopped by a State 
trooper before they got out of Texas, and they certainly wouldn't 
make it across Arkansas. The deputy sheriffs wouldn't let people 
go across Arkansas without a courtesy search. They might be 
stopped because they were following too close, weaving a little, but 
they would be stopped for the purpose of searching their car to see 
if tney have some money. If they have money, it will be taken. If 
they are white, it is going to be taken too, but the likelihood that 
they are going to be stopped if their complexion is dark is substan- 
tial. 

It happens in Shelby County, TN, but it also happens in Grand 
Rapids, MI, for example. In the West of our country the police have 



279 

a slang expression for a particular type of highway stop. It is called 
"driving while Hispanic," and they make stops of Hispanic drivers, 
and police and lawyers in the west coast States will confirm that. 
They stop Hispanic drivers because they want to search the car to 
see if they have any drugs or money, and if it is money, they take 
it. Eagle County, CO, the home of Vale, CO, one of the most exclu- 
sive ski resorts in the country, has been cited by a Federal judge 
in Denver for stopping Hispanics routinely because they are His- 
panic. 

Then there is the problem that when someone who is not totally 
innocent does something wrong, such as committing a drug offense 
and loses a family car or home, spouses and children suffer as well. 
It seems to me our society is much better served by punishing the 
person who commits the crime by imprisonment than by taking 
property upon which his dependents depend. 

Now to this piece of work that the Justice Department has sent 
over — I haven't thought about a movie that I saw a month or two 
ago channel surfing one day since I watched it until today. The 
thing that popped in my mind as I looked and listened this morn- 
ing to the DOJ proposal was a scene from an old black and white 
movie starring the Marx Brothers called "A Day at the Races." 
There is a scene where Harpo and Groucho are standing outside of 
a racetrack. A debt collector comes up and demands payment. 
Groucho pulls a $5 bill out of his pocket and gives it to the man. 
The man immediately sticks it in his pocket, and Harpo goes 
around and picks his pocket and slips it back to Groucho. The debt 
collector says, $5 is not enough. Groucho looks through a couple of 
pockets, pulls out another $5 bill and gives it to the man. The debt 
collector sticks it in his pocket and Harpo picks his pocket and slips 
it back to Groucho. This keeps going on, and finally the debt collec- 
tor happily walks away believing that he has collected $25 from 
Groucho and he has nothing in his pocket. 

The Justice Department magnanimously says we will agree to 
change the burden of proof to a preponderance of the evidence on 
the Government, but there are a couple of presumptions of evi- 
dence we would like for you to include in your law while you are 
at it. 

All they are doing is taking from the right hand and giving to 
left. Peter and Paul are going to wind up no richer or more in debt 
than they started. In fact, there are provisions in the DOJ pro- 
posal, it is like a supplementary appropriations bill. It has every- 
thing that any law enforcement agency could want stuck in that 
bill. 

There is a provision called an investigative summons that would 
make a little star chamber out of every U.S. attorney's office in the 
country. Under this proposal, any AUSA who would issue a civil 
summons to any citizen anywhere in the country and make that 
citizen come to his office, it is done ex parte, the citizen would have 
to sit down and answer his questions. The provision includes the 
possibility of subpoenaing records so an AUSA could subpoena 
someone from a thousand miles away to come to his office and 
bring any record he wanted to demand that he produce. 

That barkens back to the days before the founding of our Repub- 
lic when things went on that were repudiated by the American 



280 

Revolution, and it is certainly reminiscent of the KGB and of simi- 
lar institutions in other nations that we do not revere. 

In short, the DOJ proposal is replete with every Christmas tree | 
light the DOJ could think of, and I would suggest, and this is lit- I 
erally how strongly I feel about it, I would rather keep what we 
have on the books now than have your legitimate and laudable ef- ; 
forts to reform forfeiture be demeaned by passing this bill, because ' 
it is not reform at all. ■ 

Now, to be sure, there are things in this bill that are consistent 
and compatible with proposals that you have made, and that we 
agree with. The problem is that DOJ wants to bargain. They don't 
want to give any reform without taking some place else. 

I think I should add, Stef Cassella is a friend of mine. We have 
appeared on panels before and I have a very high respect for him ' 
and his intellect and his integrity. But he has a client: The law en- , 
forcement community. And the proposals he has made here in J 
many, many instances are bordering on reprehensible. 

Let me respond to a couple of things that were mentioned this j 
morning. The cost bond, there is no reason to phase out the cost | 
bond. It should be repealed today. It should have been repealed 1 
yesterday. There shouldn't be a cost, a price of admission, to get j 
in Federal court when it is the Grovernment that is trying to take 
property that somebody already owns. It just shouldn't be. | 

There is a modest filing fee when I go down to the clerk of my : 
Federal Court and file a lawsuit. It is usually depending on the 1 
tvpe of case, 60 or 70 bucks. That is fine. That is enough. And if j 
the Government needs some sort of reparation in extraordinary 
cases, if they have to dry dock a yacht or something, then I have ' 
no problem with a provision where they can go before a judge and \ 
show the judge that there is cause that there ought to be a bond, i 
But the ordinary run-of-the-mill case, the property owner ought to 
be able to go into court for nothing, or for a very modest filing fee. | 

What I would suggest — they are concerned about frivolous | 
claims. Well, my goodness, they are taking property from someone j 
else that it belongs to before tney got it. Let's try it for a year or | 
two and see how it works. And then if they can come back before 
this committee and prove that there is a problem with frivolous 
claims, then I will be very happy to second Mr. Cassella in suggest- i 
ing some modification of the abolition of cost bond. | 

This bill provides for a pretrial restraint of substitute assets. 
That means if the Government believes they can prove that there 
were some assets that were illegally obtained, but no longer avail- 
able for the government to seize, after the case is over and they 
have won, they have the right to go after substitute assets in the 
hands of the property owner, but they don't want to wait. 

Well, the amount of abuse replete in that proposal, I would 
think, is obvious. But I can tell you from my experience what will 
happen. They will try to seize every asset. If they have a target, 
they think they know somebody is engaging in criminal conduct, 
they will seize every asset they can find that that person owns 
under the guise of being substitute assets for the forfeiture that j 
has not yet occurred and then they will wait months, maybe even j 
years, and then indict them. And in the meantime, these people are I 
crippled, economically I mean, and far less able to defend them- | 

i 
» 

1 

1 
f 



281 

selves and maybe, just maybe, the Government is wrong and they 
really aren't as bad as guys as the Government thinks they are. 

There is one thing — there are a couple of things that I would 
urge the Chair to consider adding to your bill. One, I have dis- 
cussed with Stef Cassella in the past and I don't want to represent 
what DOJ's response is, but I don't think he thought it was a bad 
idea, and that is to have a time requirement, such as 90 days — a 
reasonable time — after a claim is filed for the Government to go 
into court. 

As it is now, once a property owner has filed a claim, property 
has been seized and a claim is filed, there is an indefinite period 
up to the 5-year statute of limitations that the Grovernment has to 
file a complaint in a Federal court. And very often, the wait from 
the time the property owner files a claim to the time the Govern- 
ment files the case in court, so you have a court to go to, it may 
be months and in some cases even years. 

So I would propose, or suggest, that there be a 90-day time pe- 
riod, after a claim is filed that the Government has to file a com- 
plaint in the Federal court and if they don't meet that, or perhaps 
go into Federal court and ask for an extension, I mean, sometimes 
you get in a bind. It happens to private lawyers. It happens to Grov- 
ernment lawyers. Then that's fine. Let them go into Federal court, 
show cause why they should be given an extension, but there ought 
to be a time limit. 

Property is often damaged and it often deteriorates, especially 
vehicles that are seized by the Government are invariably worth- 
less when they are returned than they were when they were seized 
by the Government. Cars sit out in open weather storage lots. 
Boats deteriorate because the Government doesn't want to spend 
money to maintain them and winterize them and so forth. There 
should be provisions whereby property owners who establish their 
right to property can get it back. 

Then there is one other thing that I would like to ask the com- 
mittee to consider. And that is making forfeiture cases in personam 
cases after a claim is filed. As it stands now, when a forfeiture ac- 
tion is filed, it is United States versus a parcel of land or a lot of — 
$100,000 in currency and it stays that way. And courts sometimes 
use the legal fiction that it is the property that has done wrong and 
it is the property we are punishing to avoid the application of basic 
fundamental rights that we accept in this country. 

So my suggestion is that the committee consider, when there is 
a case pending in Federal court, and in rem action against prop- 
erty, and a claim is filed, allow the claimant to be substituted as 
a party for the property so the case may start off United States v. 
a Parcel of Land at 101 North Main Street, but after the owner 
files a claim let it be United States v. John Brown, owner of that 
parcel of land. Then it is an in personam action. 

And if Mr. Brown, the property owner, has some rights, they can 
be protected by the Federal court and this legal fiction that really 
was devised at the time of the formation of the country in order 
to get jurisdiction — because as we discussed this morning, the little 
federation we formed back in 1776 couldn't hold on to those ships 
that were owned by the East India Co. and so on, the Dutch and 



282 

the English and the French, if they didn't grab the boat and keep 
it. 

Well, it is fine for the Government to use that to get jurisdiction, 
to get into court. But consider making it an in personam case, just 
like all the other cases in Federal court, once a claimant files, and 
some of the mischief that has been done in modern Federal forfeit- 
ure will end. 

And then the final thing, the one thing that would change the 
complexion of forfeiture more than anything else is to have for- 
feited property or the liquidation, the money received from liquida- 
tion of forfeited property, go into the general fund of the United 
States or of the State or of the local government. 

If we had a bounty every time a police officer made an arrest, 
the people of this country would rise up in outcry. Well, what we 
have now is a bounty on property. And drug officers, DBA and local 
drug officers alike, have told me privately, you know, we used to 
get promoted and we used to get good writeups, good recommenda- 
tions in our annual reviews by making big drug busts. It doesn't 
work that way anymore, Mr. Edwards. It is how much property we 
have seized. 

If you take the financial incentive out of the priorities in law en- 
forcement, it will change the complexion for the better of law en- 
forcement in this country. 

Mr. Chairman, thank you so much for hearing me. 

[The prepared statement of Messrs. Edwards, Smith, and 
Troberman follows:] 



283 

Prepared Statement of E.E. (Bo) Edwards III, Esq., David B. Smith, and Rich- 
ard J. Troberman, Cochairs, National Association of Criminal Defense 
Lawyers Asset Forfeiture Abuse Task Force, on Behalf of the National 
Association of Criminal Defense Lawyers 



Chairman Hyde and Members of the Committee: 

The 9,000 direct and 30,000 state and local affiliated memuers of the National Association 
of Criminal Defense Lawyers are private defense lawyers, public defenders, judges and law 
professors. They have devoted their lives to protecting the many provisions of the Constitution and 
the Bill of Rights concerned with fairness in the criminal justice system. NACDL's interest in, and 
special qualifications for understanding the import of H.R. 1916, and the dangers of the currently 
unabated federal government asset seizure and forfeiture programs, are keen. 

On behalf of NACDL, we thank you for inviting us to share our collective expertise on asset 
seizure and forfeiture programs, and for inviting one of us, E.E. Edwards, to speak on behalf of the 
Association at this hearing. We are also thankful that other outstanding members of NACDL will 
be appearing on behalf of their clients and other bar associations: Terrance G. Reed, of Washington, 
D.C; and Stephen M. Komie, of Chicago, Illinois. 



284 I 



I. Background 

A. Summary of NACDL's Position on H.R. 1916 and the DOJs Lattst "Reform" ProposalCst j 

For several years now, the Department of Justice's (DOJ) asset forfeiture program and similar I 

state and local programs, utilizing a broad array of new and expanded federal and state forfeiture ' 

statutes', have provided federal, state and local law enforcement agencies with an undulv powerful I 

i 

weapon with which to fight the War on Drugs. And too often, the weaponry has been deployed to ' 
abuse law-abiding Americans. ^ 

The unchecked use of over-broad civil forfeiture statutes has run amok. Law enforcement ' 

I 

agencies, in their zeal, have turned the War on Drugs into a War on the Constitution. NACDL has ' 
long had several concerns with the federal asset forfeiture program, and the resulting denigration of i 

constitutional protections. We thus support Chairman Hyde's much-needed bill, H.R. 1916, ; 

i 
although we think it does not go far enough to reign in over-zealous law enforcement in this area, j 

We also think the Department of Justice's latest "reform" proposal still fails to rise to the level of 

a meaningful set of corrections. Attached to this statement is our analysis of the latest DOJ , 

I 
proposal(s) (1994 and 1996), which we regard as taking away at least as much as they would give j 

in terms of reform. Still, there is some common ground between DOJ and NACDL on this subject, \ 

and any provisions of their proposal left un-critiqued in the attachment are unobjectionable to us. 

i 

See Attachments A and B. ■ 



I 



' There are over two hundred federal civil forfeiture statutes, encompassing crimes from 
gambling and narcotics violations to child pornography profiteering. 



I 

i 



285 



B. Criminal Forfeiture Versus Civil Forfeiture 

For purposes of this hearing, we will distinguish between civil forfeitures and criminal 
forfeitures. We will focus on the former. 

Criminal forfeitures are part of a criminal proceeding against a defendant. The verdict of 
forfeiture is rendered by a court or jury only if the defendant is found guilty of the underlying crime 
giving rise to the forfeiture. While defendants facing criminal forfeiture have most of the 
constitutional safeguards afforded persons in criminal proceedings, substantial problems nevertheless 
persist, particularly for third party claimants who have an interest in property subject to criminal 
forfeiture. Moreover, in its most recent Term, the United States Supreme Court held that Federal 
Rule of Criminal Procedure 1 1(0 does not require a trial court to make a factual inquiry at the time 
it accepts a guilty plea to determine that there is a factual basis for a criminal forfeiture as charged 
in the indictment.- The Court also held in that case that criminal forfeiture is an element of the 
sentence imposed for violation of certain laws, and is not an element of the offense. Accordingly, 
the Court held that the right to a jury verdict on forfeitability of property does not fall within the 
Sixth Amendment's constitutional protection, but is merely statutory; and that a trial court does not 
have to advise a defendant of the right to a jury trial in a criminal forfeiture case at the time it accepts 
a guilty plea. 



- Libretti v. U.S., -- U.S. --,116 S.Ct. 356 (1995). NACDL recommends that Congress 
amend Rule 1 1 (0 to require a trial judge to determine whether there is a factual basis for a 
criminal forfeiture included in a plea agreement. The Supreme Court in Libretti recognized the 
desirability of such a congressionally clarified requirement, but felt bound by the current text of 
1 1(0, which was not changed after Congress enacted the criminal forfeiture statutes in 1970. 
This oversight should be corrected. 



35-668 96-10 



286 



It is civil forfeiture law, however, which concerns us the most, due to the utter lack of 
constitutional safeguards and the unfair procedural advantages it afiords the goverrunent at the 
expense of law-abiding citizens.^ 
C. Civil Forfeit ure in Particular 

Civil forfeitures are in rem proceedings. The government is technically targeting the 
property, as, according to a "legal fiction," the inanimate property is deemed to be guilty and 
condemned. Because the property itself is the defendant, the guilt or innocence of the property 
owner is said to be irrelevant. The "use" made of the property becomes the central issue. It is the 
legal fiction which allows many extremely harsh and unwarranted repercussions to flow from the 
use of civil forfeiture statutes.^ 



^ The abuse of the civil forfeiture laws, and the concomitant destruction of private 
property rights, has been well documented in both scholarly and popular publications. See e.g., 
Honorable Henry J. Hyde, Forfeiting Our Property Rights: Is Your Property Safe From 
Seizure? (Cato Inst. 1995); Leonard L. Levy, A License to Steal, The Forfeiture of Property 

(Univ. of N. Car. 1996); Tamara Piety, Scorched Earth: How the Expansion of Civil Forfeiture 
Doctrine Has Laid Waste to Due Process, 45 U. Miami L. Rev. 911 (1991); Mary M. Cheh, 
Constitutional Limits on Using Civil Remedies to Achieve Criminal Law Objectives, 42 Hastings 
L.J. 1325 (1991); George Fishman, Civil .Asset Forfeiture Reform. The Agenda Before Congress, 
39 New York L.S.L.R. 121 (1994); Anthony J. Franze, Casualties of War?: Drugs, Civil 
Forfeiture and the Plight of the Innocent Owner, 70 Notre Dame L. Rev. 369 (1994); Brazil & 
Berry, "Tainted Cash or Easy Money?," Orlando Sentinel Tribune (June 14-15, 1992 expose); 
Schneider & Flaherty, "Presumed Guilty: The Law's Victims in the War on Drugs," Pittsburgh 
Press (Aug. 1 1-Sept. 6, 1991 expose). 

" In a 1993 decision, the United States Supreme Court in Austin v. U.S., 509 U.S. 602, all 
but laid to rest the legal fiction that the guilt or innocence of the property owner is irrelevant 
because it is the property that is the "wrongdoer" in an in rem forfeiture. However, during its 
most recent Term, the Court breathed new flames into this fiction, in Bennis v. Michigan, - 
U.S. -, 116 S.Ct. 994 (1996); and then completely retreated from logic and fundamental fairness 
in United States v. Ursery, and United States v. $405,089.23 U.S. Currency, 516 U.S. --,116 
S.Ct. -(1996). 



287 



Civil forfeitures allow the government to impose economic sanctions on persons who are 
buyond the reach of the criminal law — either because there is insufficient evidence to obtain a 
conviction against them; or because, while innocently supplying the material means necessary for 
certain criminal activity, they have broken no laws themselves. 

In deciding when to seize property under these laws -- power which is largely unbridled - 
law enforcement officers are influenced by provisions which often allow them to profit directly from 
the forfeiture. This obvious conflict of interest invites abusive practices. 

Historically and traditionally, as a matter of fundamental due process, the Supreme Court has 

recognized the need for special scrutiny where the government stands to benefit financially from the 

imposition of sanctions as a result of criminal laws. As Justice Antonin Scalia has well explained: 

There is good reason to be concerned that fines, uniquely of all punishments, wall be imposed 
in a measure out of accord with the penal goals of retribution and deterrence. Imprisonment, 
corporal punishment and even capital punishment cost a State money; fines are a source of 
revenue. As we have recognized in the conte.xt of other constitutional provisions, it makes 
sense to scrutinize governmental action more closely when the State stands to benefit.' 

The Supreme Court has also recognized that, under the forfeiture statutes, the government 

"has a direct pecuniary interest in the outcome of [forfeiture] proceeding[s]."* The Court put it this 

way: 



' Harmelin v. Michigan, 1 1 1 U.S. 2680, 2693 n.9 (1991) (Scalia, J., concurring) (citing 
cases). 

* United States v. James Daniel Good Real Property, 510 U.S. 43 (1993). 

5 



288 



The extent of the Government's financial stake in drug forfeiture is apparent from the 1990 
memo in which the Attorney General urged United States Atf^meys to increase the volume 
of forfeitures in order to meet the Department of Justice's annual budget target; 
"We must significantly increase production to reach our budget target." 

* * * 

". . . Failure to achieve the $470 million projection would expose the Department's 
forfeiture program to criticism and undermine confidence in our budget projections. 
Every effort must be made to increase forfeiture income during the remaining three 
months of [fiscal year] 1990." 

Executive Office of the U.S. Attorneys, U.S. Department of Justice, 38 U.S. Attorney's 

Bulletin 180 (Aug. 15, 1990).' 

Likewise recognizing that the practical implications of this inherent conflict, a federal district court 

recently explained well the unintended consequences of the current civil forfeiture statutes so in need 

of congressional reform: 

Failure to strictly enforce the Excessive Fines Clause inevitably gives the government an 
incentive to investigate criminal activity in situations involving valuable property, regardless 
of its seriousness, but to ignore more serious criminal activity that does not provide financial 
gain to the government.' 

Indeed, this inherent conflict of interest can and does lead to serious law enforcement 

problems. For example, assume that law enforcement agents receive information from an informant 

that a shipment of 20 kilos of cocaine, worth an estimated $500,000, is to arrive at a stash house on 

Monday; that it is to be "fronted" to mid-level dealers once it arrives; and that those mid-level 

dealers are to deliver $500,000 to the stash house on Friday. If the agents make the arrests on 

Monday, they can confiscate the cocaine. If, on the other hand, they wait until Friday to make 

arrests, they can seize the $500,000, which they can forfeit for their use. Which do you think they 



■ Id. at 502, n.2. 

' United States v. Real Property Located at 6625 Zumeriz Drive, 845 F. Supp. 725, 
735 (CD. Cal. 1994). 



289 



will choose, the money or the cocaine? Again and again, the money is too enticing to pass up. 

The incentive structure under current law is actually debilitating to effective law 
enforcement. And all too often is the root of outright abuse of entirely innocent, but property- 
holding, Americans. 

The presumption of innocence is fundamental to the American criminal justice system. 
This basic tenet is compromised whenever assets are confiscated, as they are under federal and 
many state civil forfeiture statutes, without any proof of wrongdoing.' Under these unconscionable 
laws, after confiscation it is up to the person whose assets have been seized to prove that he or she, 
and the 'suspect" property, is innocent, and thus that the Government should give the property back 
to the owner. This turns our precious justice system "on its head." 

Although these forfeiture laws can, as Congress intended, serve legitimate law enforcement 
purposes, they are currently susceptible to (and arguably invite) unwise, unjust, or unconstitutional 
abuse. The current forfeiture laws are being used to forfeit property of persons who have no 
responsibility for its criminal misuse ~ for instance, as occurs with the forfeiture of currency due to 
cocaine "traces" found on it (a very, very large percentage of all the currency in .\merica). This 
"police practice" has fimneled millions of dollars into local police and federal agency coffers, with 
most of the seizures ~ between 80% to 90% - never challenged. The reason they are so rarely 
challenged has nothing to do with the owner's guilt, and everything to do with the arduous path one 



' For example, the Orlando Sentinel investigation found that no charges were filed in 
three out of every four cases lodged b\ Volusia County Sheriffs Deputies. And the Pittsburgh 
Press investigation found that Americans fared even worse when encountering federal law 
enforcement agents: 80% of the people who lost property to the federal government were 
never charged. 



290 



must joumev against a presumption of guilt, often without the benefit of counsel, and perhaps 
without any money left after the seizure with which to fight the battle. As in Witness Wilhe Jones' 
case, authorities unbridled in their handling of the current, unrestrained civil forfeiture laws routinely 
seize large amounts of cash at airports and roadblocks without establishing any connections to drug 
dealing other than the money itself (and perhaps, even more perniciously, the racial "profile" of the 
money-holder). 

The policy of allowing the seizures of large sums of cash simply because it is currency, must 
be re-evaluated for comportment with sound policy as well as constitutional protections. Studies 
have shown that between 80% and 90% of the currency available today will test positive for some 
kind of drug; therefore, the practice of having drug dogs "alert" on the money is meaningless.'" The 
frequent practice of targeting minorities in airports and along interstate highways for search and 
seizure" is based on nothing more than blatant racism. It is morally (and should be legally) 
bankrupt. 

Statistics on seizures document the use of racially based "profiles" to determine law 
enforcement targets. Willie Jones' case is but one example. There is also the infamous, but not 
unique, case of Volusia County, Florida. Armed with "anything goes" asset forfeiture laws 



'" See e.g. United States v. $639,558 U.S. Currency, 955 F.2d 712, 714 n.2 (D.C. Cir. 
1992); United States v. S53,082.00 U.S. Currency, 985 F.2d 245, 250-251 n.5 (6th Cir. 1993); 
United States v. 530,060.00, 39 F.3d 1039, 1042 (9th Cir. 1994). See also David B. Smith. 
Prosecution and Defense of Forfeiture Cases (Matthew Bender) at para. 4.03, 4-79-84. 

" See "Tainted Cash or Easy Money", Orlando Sentinel Tribime (Jun.-Aug. 1992); 
"Presumed Guilty; The Law's Victims in the War on Drugs", The Pittsburgh Press (Aug. 11-16, 
1991). 



291 



patterned after the federal statutes, Sheriff Bob Vogel's "elite drug squad" has seized well o\er S8 
million in the past few years from motorists exercising their constitutional right to travel peacefully 
along the Nation's highway system, on "1-95." 

Out of 262 seizure cases, only 63 even resulted in criminal charges. Of the 199 cases in 
which there was no evidence to supjsort criminal charges, 90% of the drivers were minorities. 
Though neither arrested nor charged with a crime, these individuals had their money seized. When 
confronted with the facts of his lucrative operation. Sheriff Vogel said: "What this data tells me is 
that the majority of money being transported for drug activity involves blacks and Hispanics."'- 
Similarly, a 10-month Pittsburgh Press investigation of drug law seizure and forfeiture included an 
examination of court records on 121 "drug courier" stops where money was seized and no drugs 
were discovered. The Pittsburgh Press foimd that African-American, Latino, and Asian people 
accounted for 77% of the cases. '•' 

Wherever these unrestrained asset forfeiture statutes exist, in the state or the federal system, 
they invite, and have borne, abuse of the Nation's citizenry. This is true, be it by state and local 
officers, federal agents, or some combination of the two in ever-more-frequent joint "task force" 
operations. 

H.R. 1 91 6 is an important first step toward ensuring that federal agents, and those with whom 
they work in joint task force operations, do not wreak havoc upon the People's rights in the name 



'- See id. 
" See id. 



292 



of "asset forfeiture" and for their own financial benefit. Moreover. man\ state civil asset forfeiture 
statutes are patterned on the federal scheme. Thus, congressional correction of the federal asset 
forfeiture will also provide the states with a better, more just model to follow. 
D. Ca.se Study 

A prime example of forfeiture "justice" in America is the Volusia County, Florida case study. 
In the absence of any evidence of criminal complicity, and with the Sheriffs knowledge that the 
currency would have to be returned, the law enforcement agency offers "settlement" to asset 
forfeiture victims who seek to (or who for economic reasons, must) avoid undue delay and 
unnecessary legal fees.''' Rather than go to court to defend seizures, the agency cuts "deals" with 
the drivers. 

Motorists can get some of their money back if they agree not to sue the abusive agency. For 
example, Sheriffs Deputies seized $19,000 from a Massachusetts paint shop owner. They returned 
$14,250 and kept $4750. They seized $38,923 from a Miami lawn care business ovwier; returned 
$28,923 and kept $ 1 0,000. They seized $3 1 ,000 from a Virginia car salesman; rettimed $27,250 and 
kept S3750. None of these people were charged with a crime. All were offered out-of-court 
settlements with no judicial supervision of the process. Indeed, Volusia County judges expressed 
surprise at these settlements.'* 



'* Note that there is no "speedy trial" right to assist a citizen in getting back her 
wrongfully seized property, although we strongly encourage this as an amendment to H.R. 1916. 

" See authorities cited jwpra note 3. 



10 



293 



Volusia County is just one especially well documented case stud\ Its fact pattern is neither 
anomalous nor confined to state and local authorities. If anything, the federal government's civil 
asset arsenal is even more ripe for abuse, more troubling, and pervasive. Federal law enforcement's 
jurisdictional reach, funding and equipment grows ever-more expansive and sophisticated (even 
militaristic).'* 

Although DOJ professes in its public documents to abide by the principle that "[n]o property 
may be seized unless the government has probable cause to believe that it is subject to forfeiture,"" 
the reality is very different. Federal agents routinely seize people's propert>- based on nothing more 
than otherwise inadmissible "hearsay" evidence, frequently from notoriously suspect "informants" 
who stand to profit from production of such "tips." DOJ gives monetary rewards to individuals who 
"report" information leading to a forfeiture. These contingency bounties can be as much as 25% of 



" See generally e.g., James Bovard, Lost Rights: The Destruction of American 
Liberty 13 (St. Martin's 1994), chronicling the fatal case of the unfortunately property-rich, 
Donald Scott: 

Early in the morning of October 2, 1992, a small army of thirty-one people [from several 
law enforcement agencies, including the federal Drug Enforcement Agency (DEA)] 
smashed their way into sixty-one-year-old Donald Scott's home on his 200-acre Trails' 
End Ranch in Malibu, California. The raiders were equipped with automatic weapons, 
flak jackets, and a battering ram. * * * After killing Scott, the agents thoroughly searched 
his house and ranch but failed to find any illicit drugs [One of the claimed objectives; 
they then said they were looking for undocumented aliens]. Ventura County 
[California] district attorney Michael Bradbury investigated the raid and issued a report in 
1993 that concluded that a "primary purpose of the raid was a land grab [by the 
agencies]." 
See also Edwin Meese 111 & Rhett DeHart, "How Washington Subverts Your Local Sheriff," 
Policy Review (Jan./Feb. 1996) (explaining dangers of current over-federalization of the criminal 
law, with federal criminal jurisdiction now spaiming over 3,000 "federal" crimes). 

" U.S. Department of Justice, Annual Report of the Department of Justice Asset 
Forfeiture Program 1991 (Washington, D.C.: Government Printing Office, 1992), at 7. 



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the forfeiture proceeds. That kind of money can buy a lot of "tips." 

The DOJ's internal documents read a little different from their public ones. A September 
1992 DOJ newsletter noted: "Like children in a candy shop, the law enforcement community chose 
all manner and method of seizing and forfeiting property, gorging themselves in an effort which soon 
came to resemble one designed to raise revenues."" Nevertheless, Cary Copeland, Director of the 
DOJ's Executive Office for Asset Forfeiture, declared at a June 1993 congressional hearing: ' / ■?• 
forfeiture is still in its relative infancy as a law enforcement program."" The darling of a federal 
police state's nursery? And the Federal Bureau of Investigation announced in 1992 that it 
anticipated its total seizures of private property would increase 25% each year for the following three 
years.-" 

Most courts have recognized the problem is the law; that any real relief from asset 

forfeiture abuse must come from Congress, through meaningftil legislative reform. For example, 

as the United States Court of Appeals for the Second Circuit recently put it: 

We continue to be enormously troubled by the government's increasing and virtually 
unchecked use of the civil forfeiture statutes and the disregard for due process that is 
buried in those statutes."^' 



" U.S. Department of Justice, "Message From the Director: 'Do the Right Thing,'" Asset 
Forfeiture News (Sept./Oct. 1992), at p. 2. 

" Statement of Cary H. Copeland before the Subcommittee on Legislation and National 
Security, United States House of Representatives Government Operations Committee (Jun. 22, 
1993), at 4. 

-" U.S. Department of Justice, Annual Report of the Department of Justice Asset 
Forfeiture Program 1991 (Washington, D.C.: Government Printing Office, 1992), at p. 27. 

-' United States v. All Assets of Statewide Auto Parts, 971 F.2d 896, 905 (2nd Cir. 
1992). 

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In short, an utter tide of abuse of innocent citizens is sweeping the Nation, which has led to 

widespread awareness that the forfeiture law must be reformed to stop the abuse. This Comminees 

hearing, and H.R. 1916, should go some distance toward alerting the rest of the public and the rest 

of the Congress to the grave reality of the current laws, and toward correcting this egregious state 

of "justice" in America. We encourage you Mr. Hyde, and the rest of this Honorable Committee, 

to forge ahead on the road to real reform of the federal asset forfeiture regime. 

II. H.R. 1916: 

Achieves Much; Should be Strengthened to Finish the Journey to Reform 

A. Notice of Seizure and Cost Bond 

H.R. 1916 would correct the unfairness spawned by the currently unconscionable "cost 
bond" requirements for access to justice. The bill would eliminate the requirement of the cost bond, 
and it would extend the time limits under which a person whose property is seized may file a claim 
after the government files a forfeiture action in court against the property. 

Now, many claimants are losing their right to contest the forfeiture of their property due to 
procedural defaults. For example, they may lose their rights because of a failure to meet the 
extremely short time deadlines for filing a claim and cost bond with the seizing agency under 1 9 
U.S.C. Sec. 1608 (20 days from the date of the first publication of the notice of seizure), and for 
filing a second verified claim (this one in federal district court), under "Supplemental Admiralty 
Rule c (6)"' (10 days from the date of which the warrant of arrest in rem is executed). 

Shockingly, the application of the Supplemental Rules allows warrantless seizures where 
tliere are no recognized exceptions to the constitutionally mandated warrant requirement. These 
rules are often ignored in order to comply with due process, but they nevertheless remain on the 

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books, ready for abuse. 

When the DEA or the FBI seizes property, a claimant is required to post a bond in the 
amount of 10% of the value of the property to preserve the right to contest in court the forfeiture (not 
less than $250, up to a maximum of $5,000). The claimant has up to 30 days to post the bond after 
receipt of the notice of forfeiture. Frequently, the government seizes several items, and requires that 
a separate bond be posted for each item. Many people lose their property at this stage because they 
are unable to post the cost bond within the time limit. 

This administrative forfeiture proceeding was designed to resolve uncontested forfeitures. 
Under this process, a post-seizure probable cause determination is waived. The property is forfeited 
without benefit of court intervention. The cost bond is the antiquated, perfunctory mechanism 
through which contested seizures are supposed to be able to proceed to judicial resolution. 

However, the requirement of posting a cost bond eliminates through attrition many claims 
which would otherwise be contested. Adding insult to injury, the cost bond is used to pay the 
government 's costs of litigating the forfeiture. This is an absurdly unjust arrangement ~ letting the 
government take property away from someone without having to prove anything, then making the 
owner pay in advance the government's costs of trying to take it away from him permanently. 
Furthermore, unlike criminal cases, the bond is imposed without any independent determination of 
probable cause. 

The cost bond would be abolished by H.R. 1916, as it should be. 
B. Court-Appointed Counsel for Indigents 

Another extremely importai i reform that would be accomplished by H.R. 1916 is allowance 
for appointment of counsel in cases in which the claimant satisfactorily demonstrates to the court 

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that he or she is financially unable to retain counsel to fight for the return of the seized property. 
The standards to be applied are the same, well-established ones applicable to the appointment of 
counsel for indigent criminal defendants. But the money would come directly from the Justice 
Assets Forfeiture Fund, so no new money would need to be budgeted for this just cause. 

Contesting a forfeiture case can be an expensive proposition for one seeking the return of his 
or her property. Many forfeitures go uncontested due to the high cost of litigating these cases. For 
example, often an owner cannot economically hire counsel to defend against forfeiture of a $1 0,000- 
520,000 automobile if the government is intent on proceeding to trial. Legal fees in such a case 
might well eat up the value of this seized property in short order. 

If a property owner has no money with which to retain counsel (either because he is too poor, 
or because the government has rendered him indigent by taking or restraining his property), he does 
not have a right to appointed counsel. He must defend the action without aid of counsel. 

Claimants in civil forfeiture cases are not entitled to counsel as a matter of right, because the 
Sixth Amendment does not apply to "civil" proceedings, including effectively punitive forfeitures. 
Nor are federal defenders and Criminal Justice Act "panel" lawyers authorized to represent claimants 
in civil forfeitures. There is not even a provision in the law to allow a person to recoup his or her 
fees if a costly fight is undertaken and the property is ultimately shown to have been wrongly seized. 
Consequently, many people lose their property simply because they cannot afford to hire a lawyer 
and have no idea how to battle the government through the complex statutory terrain without one. 

The indigent counsel provision in H.R. 1916 at least provides the indigent person a legally 
trained champion in his or her fight to get a seized property back, and is a first step toward bringing 
fundamental due process into this legal twilight zone of asset forfeiture law. 

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C Burdens and S tnndards of Proof 

H.R. 1916 puts the burden of proof, and sets the standard of proof, where they should be 
according to fundamental principles of due process. Cunent statutory law gives the government 
many unfair procedural advantages over citizens, especially as regards the burden and the standard 
of proof 
IVho Should Bear the Burden of Proof? 

H.R. 1916 rightly places the burden of proof with the government so that the government 
must prove its case before it can permanently deprive a citizen of his or her property. 

One of the gravest problems with the current statutory framework is the burden of proof 
provision, at 19 U.S.C. 1615. The statute places the burden of proof on the claimant to show that 
the property is not subject to forfeiture. This is fundamentally unfair and constitutionally anomalous 
in view of the quasi-criminal character of the proceedings and the important interest at stake. It is 
extremely difficult to prove a negative. 

For example, when the government offers testimony that an unidentified informant claims 
to have participated in, or witnessed, a drug transaction at a claimant's residence, the claimant bears 
the burden of proof that it did not occur. This tums the criminal presumption of innocence on its ear. 
The reversal of the normal burden of proof is unique to civil forfeiture. In all other cases, the party 
trying to change the stains quo has the burden of proof, by at least "a preponderance of the 
evidence." 
What Should the Burden Be? 

In addition to placing the burden of proof with the government, H.R. 1916 also rightly 
ensures that the government can deprive one of property only upon proof by "clear and convincing" 

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evidence that the property is forfeitable. This is much less than the standard applicable in quite 
similar criminal proceedings, in which the punishment can likewise be the taking of ones propen\ . 
but it is still better than 'probable cause." At least the clezir and convincing standard recognizes that 
deprivation of property on allegation of criminality is fundamentally akin to a criminal matter, and 
not a mere "civil" one. 

Moreover, Congress should clarify that the evidence allowed to meet the standard of proof 
must be that which existed at the time of the proceeding's commencement. Evidence acquired after 
the fact should not be allowed to "cure" the lack of cause at the time of the government's filing for 
the property. After-acquired evidence should be excluded and cases lacking cause at the time of 
filing should be barred." 
D. The Need for a Meaningful Innocent Owner Defense 

H.R. 1916 provides important clarification of the drug forfeiture law's irmocent owner 
provisions. 

Presently, many innocent people lose valuable property rights because of something someone 
else has done which was beyond their control. The system treats a criminal defendant better that an 
innocent third party. In criminal forfeitures brought under 21 U.S.C. 853 and the "RICO" statutes, 



-- See e.g.. United States v. $191,910.00 in U.S. Currency, 16 F.3d 1051 (9th Cir. 
1994) ("Without such a rule, goverrunent agents might be tempted to bring proceedings (and 
thereby seize property) on the basis of mere suspicion or even enmity and then engage in a 
fishing expedition to discover whether . . . cause exists.). See also United States v. $31,990, 982 
F.2d 851, 856 (2nd Cir. 1993) ("The institution of a forfeiture can have serious effects on an 
owner's right to use and control his property. It should not be undertaken without a 
demonstrably good reason."). 

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the criminal defendant is entitled to many criminal procedure safeguards.-^ Innocent third parties 

in civil forfeiture proceedings should receive at least the same, and probably more rights. Instead. 

they are required to bear the burden of proof and overcome the government's routine use of 

otherwise inadmissible hearsay. 

In his Annual Report of the Department of Justice Asset Forfeiture Program (1990), the 

Attorney General claimed: 

The Department of Justice routinely grants petitions for remission or mitigation of forfeiture, 
primarily to innocent lienholders and innocent family members. It is the Department's 
policy to liberally grant such petitions as a means of avoiding harsh results. 

Although this statement sounds good, it is not accurate. Experienced defense attorneys rarely file 

such petitions, because far from being "routinely grant[ed]," they are routinely denied. 

For two centuries, 1 9 U.S.C. 161 8, the statute governing remission, has provided for the grant 
of remission to petitioners who establish that they acted "without willful negligence." Historically, 
DOJ had granted remission based upon a showing that the petitioner was not negligent in the care 
and use of the property. But on August 31, 1987, DOJ issued new regulations abandoning the 
statutory negligence standard and requiring petitioners to meet a more stringent standard of care." 

To get relief through the remission process, a petitioner now must prove that forfeiture of his 



" However, most circuits have misinterpreted Section 853 (d)'s rebuttable presumption to 
mean that any property of a person convicted of a Title 21 drug felony is subject to forfeitiire 
under section 853 if the government establishes its case by a preponderance of the evidence. 
Congress should cl<uify its intent that the standard under Section 853 is beyond a reasonable 
doubt. 



-* See 28 C.F.R. Section 9.5(b)(5) 

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property would violate due process, a very high threshold. This policy is not only in conflict with 
the report of the Attorney General. It cannot be reconciled with the negligence standard adopted by 
Congress in Section 1618. 

Moreover. DOJ does not make remission decisions pubic and typically does not even explain 
to the petitioner its reasons for denying a petition. Remission policies and procedures are intended 
to function as a check on unbridled prosecutorial discretion and to avoid unfair and unjust results. 
As implemented under current law, remission is totally left to the discretion of the DOJ, with 
vinually no review or appeal of its decisions. 

This lack of oversight often results in harsh, imwarranted, and arbitrary forfeiture decisions. 
The examples cited in the Orlando Sentinel, in the Pittsburgh Press, in Chairman Hyde's book. 
Forfeiting Our Property Rights, and in the book. License to Steal, all exemplify the harm to 
innocent citizens that results from the abuse o>f unbridled prosecutorial discretion.-' Congress 
should reign in the DOJ with respect to innocent parties, and return the law to its rightful place ~ as 
it was before DOJ issued its August 31, 1987, self-interested, self-regulation. 

21 U.S.C. 881, the federal drug forfeiture statute, currently provides a defense from 

government forfeiture to an innocent owner of the property. Section 881 provides: 

". . . Except that no property shall be forfeited under this paragraph to the extent of an 
interest of an owner, by reason of any act or omission established by that owner to have 
been committed or omitted without knowledge or consent of that owner." 

The majority of federal circuits have held that an owner may avoid forfeiture by establishing either 



" See supra note 3. 

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lack of knowledge or lack of consent.-* However, a minority of circuits ha\ e held that congressional 
use of the word "or" really means "and." They have held that in order to prevail, an owner must 
establish both lack of knowledge and lack of consent.^' Although these decisions have been heavily 
criticized, they unfortunately persist as binding authority in their respective circuits." 

The requirement of establishing both lack of knowledge and lack of consent presents a 
particularly harsh problem for innocent spouses. The innocent spouse may have knowledge that the 
other spouse is engaging in unlawfiil activity in the home, but does not consent to it and is indeed 
powerless to do anything to stop it. Battered spouses are especially hurt by the predicament. The 
no-win situation presented is either: (.1 ) leave the family home; or (2) report the activity to law 
enforcement, perhaps risking physical danger, and at least, the arrest and prosecution of the spouse I 
(whose Hnancial support may well be essential to the family's survival).^' j 

H.R. 1916 would clarify this statute, to confirm the existence of a defense when the innocent 
owner can establish either lack of knowledge or lack of consent. 



" See e.g.,United States v. 6109 Grubb Road, 886 F.2d 618, 625 (3d Cir. 1989); United 
States v. 141st Street Corp., 91 1 F.2d 870, 878 (2d Cir. 1990), cerr. denied, - U.S. -,111 
S.Ct. 1017 (1991); United States v. One Parcel of Real Estate at 1012 Germantown Road, 

963F.2d 1496 (11th Cir. 1992). 



-'' See e.g.. United States v. One Parcel of Land Known as Lot III-B, 902 F.2d 1443 
(9th Cir. 1990). 

^' And in its most recent Term, the Supreme Court expressly held that in the absence of 
an "iruiocent owner" statutory provision, due process is not offended by deployment of the 
"guilty property" fiction to the property of an actually innocent owner. Bennis v. Michigan, — 
U.S. --,116 S.Ct. 994 (1996). Clearly, Congress must act. 

-' Such a "choice" also arguably infringes upon the concept of spousal privilege. 

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E. Contested Property Possession Reforms 

H.R. 1916 would reform the law to ensure that contested property is not abused or destroyed 
by the government during the time it holds it. The bill provides for cases in which the government's 
holding of the property under dispute would create a substantial hardship on the person from whom 
the government seeks to permanently deprive the person of her property. 
Viclim 's Right to Restitution for Wrongful Destruction of Property by the Government 

H.R. 1916 would make an important, narrow amendment to the federal Tort Claims Act, 
to allow an action for damages against the government should it wrongfully, intentionally, or 
negligently destroy the individual's property while it holds it in seizure. 

The federal government now does an inadequate job of maintaining seized property. And 
currently, innocent owners have no recourse if their property is damaged or otherwise alleged to 
deteriorate in value while in the custody of the government. 

The government often takes two years or more after seizure to bring a forfeiture case to trial. 
By the time a case is resolved, the asset has often depreciated to a fraction of its seized value. 

When the government wins, the depreciated asset is auctioned off for a fraction of its seized 
value and innocent lienholders often lose part of their equity. If the owner wins the forfeiture case, 
it is a pyrrhic victory — and an absolute travesty to the citizen who has been forced to spend money 
and time fighting the forfeiture case. The government raises its undeserved shield of sovereign 
immunity as a defense to any claims for depreciation and property damage. Therefore, even when 
the government cannot prove its case, the owner often still loses. 

The United States should be liable for the loss of value and loss of use of any property it 
seizes if the claimant prevails, regardless of whether the government's care of the property was 

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negligent. This should certainly be the case when a court later determines that the seizure was 
illegal. Yet, under current law, it is unclear whether a claimant has a right of action against the 
government for losses occasioned by an illegal seizure and wrongful handling of propeny. H.R. 
1916 would clarify the law. 'i 

Substantial Hardship Temporary Relief Provision 

H.R. 1916 recognizes that often a seizure can deprive someone of their ver>' home or 
livelihood before the property is returned to its rightful, private owner through the arduous asset 
forfeiture procedures. Accordingly, the bill provides for the temporary release of property where a 
claimant can demonstrate that a substantial hardship will result if property is not released during 
pendency of the action. 

For example, where the government seizes a truck belonging to a trucker, the trucker is 
effectively out of business during the time it takes to resolve the forfeiture (which unfortunately, can 
take years, at least absent a "speedy triar'-type reform). Even if the claimant ultimately prevails, by 
the time he gets his truck back (even assuming it is in the same, undamaged shape it was in before 
the government took it), he could be out of business. H.R. 1916 would allow the trucker to continue 
using his truck, under conditions imposed by the court (to safeguard the truck), while the action is 
pending and unless and until the government proves it is entitled to permanently deprive him of the 
truck. Meanwhile, the trucker, still employed, could continue contributing to the economy and the 
tax system. Other cases that come to mind in which this provision might prove essential are cases 
involving one's only place of residence; or a business, which, if seized, might put not only the 
proprietor, but all of his or her employees, out of work. 



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III. Other Reform Suggestions 

A. Governmental Use of Hearsay Must be Curbed 

One of the most egregious problems in this area is the government's ability to meet its 
probable cause showing through the use of hearsay. Congress needs to curb this practice. 

The courts allow the government to meet its threshold, probable cause showing, through 
otherwise inadmissible hearsay testimony.'*' But the cases offer virtually no discussion or rationale 
for their holdings. They seem to reflect nothing but a judicial tradition from an inapt context: the 
allowance of hearsay to establish probable cause for arrest and search warrants. The judicial analogy 
to cases allowing hearsay to support the issuance of warrants fails, because with regard to warrants 
other safeguards are in place. For instance, the government has the highest burden of proof in 
criminal cases spawned by the issuance of warrants. Whereas, in civil forfeiture proceedings, the 
government has no burden of proof at all once probable cause is satisfied. 

If H.R. 1916 is passed, the burden of proof will rest with the government and the hearsay 
problem will no longer exist. But in the absence of H.R. 1916, Congress should immediately clarify 
that, subject to the Rules of Evidence, hearsay is not admissible by the government to establish 
probable cause to forfeit property. One way or another. Congress should forbid the use of hearsay 
to establish cause for forfeiture. 

Rule 1101 of the Federal Rules of Evidence provides that the rules "apply generally to civil 
actions and proceedings including admiralty and maritime cases. . . . ". Rule II 01(d) exempts the 



"> See e.g.. United States v. $91,960.00, 897 F.2d 1457, 1462 (8th Cir. 1990). But see 
United States v. One Pontiac Sedan, 194 F.2d 756, 760 (7th Cir.), ceri. denied. 343 U.S. 966 
(1952). 

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issuance of search and arrest warrants from the scope of the Rules. Significantly. Rule 1 101(e) 
provides that, absent statutory provisions to the contrary, the Rules apply to a list of enumerated 
proceedings, including "actions for fines, penalties, or forfeitures" under 19 U.S.C. 1581-1624.^' 
B. Need for Statutory Time Limits on the Government : Speedv Trial Act for Forfeiture Cases 

H.R. 1916 should be strengthened to place time limits on the government's ability to hold 
property without moving the process along for resolution of the contested possession. 

Under the present forfeiture scheme, there are inadequate statutory deadlines placed on the 
government to keep the process moving. For example, except in the case of conveyances seized for 
violation of the drug laws, there is no time limit within which the seizing agency must give notice 
to the owner of the property, of the government's intention to seek forfeiture of the property. 
Notice 

On January 15, 1993, Deputy Attorney General Gary Copeland, Director and Chief Counsel 
of the Executive Office for Asset Forfeiture, issued Directive 93-4, which recognizes that "a 
fundamental aspect of due process in any forfeiture proceeding is that notice be given as soon as 
practicable to apprise interested persons of the pendency of the action and afford them an 
opportunity to be heard." 

Directive 93-4 orders that written notice to owners and other interested parties (property 
stakehalders) known at the time of the seizure "shall occur not later than sixty (60) days from the 
date of the seizure." It further provides that "where a reasonable effort of notice has not been made 



" Judge Beam of the Eighth Circuit has written persuasively that due process is offended 
by the permitting the government to forfeit a person's property on the basis of the notoriously 
unreliable basis of hearsay. See United States v. 512,390.00, 956 F.2d 801, 812 (8th Cir. 1992) 
(Beam, J., dissenting). 

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within the 60-day period and no waiver has been obtained, the seized propert> must be returned and 
the forfeiture proceeding terminated." This policy became effective March 1. 1993. Of course, this 
is merely a matter of DOJ policy, and not law, and thus a claimant does not enjoy standing to enforce 
ii in court, or to contest a seizure based on a dilatory government practice with regard to the notice. 

Directive 93-4 should become law, not just policy, through an amendment to H.R. 1916. 
Government Commencement of Proceedings 

A second, related matter, has also created problems for owners of seized property. There is 
no time limit governing the government's initiation of suit in federal court after receiving notice of 
an owner's claim and cost bond. Indeed, although the law requires that a property owner must file 
a claim and cost bond within 20 days of the date of first publication, there is no similar deadline 
placed on the government for commencing a judicial forfeiture action in district court. 
Governmental delay in filing an action after receipt of a claim creates a severe hardship for property 
owners and other stakeholders in the property (e.g., investors). Not only does delay deprive owners 
the use of their property for jm indefinite period of time, but it also puts them in the untenable 
position of having to either (1) continue making payments on the seized property, thereby possibly 
providing a windfall to the government and creating additional loss for themselves should the 
government prevail, or (2) risk destroying their credit. This Hobson's Choice can result in a 
substantial loss to the property owner and other stakeholders. 

One has virtually no remedy in this situation. Most courts have held that once the 
government serves Notice of Seizure and Intended Forfeiture, the court is divested of jurisdiction 



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under ihc Rules of Criminal Procedure." 

In the interests of justice, and in the interest of the economy. Congress should require the 
government to commence an action for forfeiture in district court within 60 days of receipt of the 
notice of claim. This time frame is already in effect in forfeitures involving seized conveyances 
under 21 U.S.C. 888." This provision should simply be extended to all forfeitures. By giving the 
seizing agency 60 days to file a Notice of Intent to Forfeit, and another 60 days to file the action once 
a claim is received, the government would still have a total of at least 120 days from the date of 
seizure in which to initiate action in district court. 
C. N^ed for a Substantial Nexus Requirement 

Federal forfeiture statutes do not explicitly require that there be a substantial nexus between 
the alleged unlawful activity and the property seized. They should. Although the legislative 
history certainly suggests such a requirement, the courts are unfortunately split as to whether there 
need be such a substantial nexus and what it means.'^ 



" See e.g., Shaw v. United States, 891 F.2d 602 (6th Cir. 1989); United States v. Elais, 
921 F.2d 870 (9th Cir. 1990); United States v. U.S. Currency, 851 F.2d 1231 (9th Cir. 1988); 
United States v. Castro, 883 F.2d 1018(1 1th Cir. 1989); United States v. Price, 914 F.2d 1507 
(D.C. Cir. 1990). 

"5ee21 U.S.C. 888(c). 

" The Senate Report accompanying the amendment adding subsection (a)(7) to 21 U.S.C. 
881 noted that the proposed amendment adding real property to the categories of property that 
could be forfeited would lead to the seizure and forfeiture of property "indispensable to the 
commission of a crime." S. Rep. No. 225, 98th Cong, ist Sess. 195, reprinted in 1984 
U.S.C.C.A.N. 3182, 3378. The Senate Report explained Congress' motivation in passing 21 
U.S.C. 881 (a)(7) as follows: 

Under current law. if a person uses a boat or a car to transport narcotics or uses 
equipment to manufacture dangerous drugs, his use of the property renders it subject to 
civil forfeiture. But if he uses a secluded barn to store tons of marijuana, or uses his 

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Absent explicit statutory guidance to the contrary, the courts have expanded the situations 
in which real property can be forfeited; in many cases, doing away with the requirement that there 
be a substantial connection to alleged criminality. In one of the most egregious cases, the court 
affirmed the forfeiture of a residence based on two telephone calls midefrom the informant to the 
homeowner at the residence, during which the sale of cocaine was said to have been negotiated." 
This is all the evidence the government had, but it was deemed enough to allow a forfeiture of the 
residence. No drugs were ever stored at the residence and no sales took place there. 

Congress could not have intended such an unfair result. Congress should modify the statute 
to require that a court must fmd that a substantial connection exists between the alleged unlav^I 
activity and the property desired by the government before the property can be lawfully forfeited. 
Congress should also give some examples in the legislative history, in order to guide courts as to 
what "substantial nexus" means under this congressional revision. H.R. 1916 should be amended 
to provide this explicit statutory clarification on the need for a substantial connection nexus. 
D. Economic Conflict of Interest Must Be Eliminated 

The incentive scheme for law enforcement's direct profiteering from the forfeiture statutes 
must be addressed. H.R. 1916 should be amended to address this core problem with the current 
forfeiture laws. 



house as a manufacturing laboratory for methamphetamine, there is no provision to 
subject his real property to civil forfeiture even though its use was indispensable to the 
commission of a major drug on'ense and the prospect of forfeiture of the property 
would have been a powerful deterrent, 
(emphasis added here) 

" United States v. One Parcel of Real Estate Commonly Known as 916 Douglas 
Avenue, 903 F.2d 490 (7th Cir. 1990), cert, denied, 1 1 1 S.Ct. 1090 (1991). 

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We can no longer ignore the conflicts of interest and policy problems which arise when law 
enforcement and prosecutorial agencies reap fmancial bounty fi-om the forfeiture decisions they 
make. Decisions regarding whose property to seize, and how to deal with citizens whose property 
has been seized is too often dictated by the profit the agencies stand to realize from the seizures. 

State and local law enforcement agencies frequently work with federal agencies on forfeiture 
cases and share the proceeds of the forfeiture. This procedure thwarts state law. which may requv 
forfeited assets to be deposited into the general treasury. It also allows states to take advantage of 
broader federal statutes. The types of cases the state and local agencies choose to pursue together 
are often influenced by the state's knowledge that the federsil government will share the proceeds 
from the forfeited assets they acquire together. The federal government's participation in this 
preemption of state priorities should be eliminated by Congress. 

In short, the inherent conflict of interest and unbridled discretion sanctioned by the current 
forfeiture law invites abuse. The opportunities for abuse are legion. For example, local police may 
cut deab with federal agencies to target individuals whose assets can best benefit both agencies. 
Joint forfeitures allow local police and federal agencies to avoid state statutory and constitutional 
law. Law enforcement officers and prosecutors have come to rely on forfeitures as sources of extra 
revenue. Congress should especially investigate the conflict of interest created when prosecutors 
and law enforcement agencies set quotas for forfeited assets and use the money to create additional 
positions and buy "informants" (to help generate still more forfeitures, for still more revenue). 



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IV. Recap: Congress Must Act to Reform the Abusive Asset Forfeiture Laws 

In August of 1 99 1 . NACDL's Board of Directors adopted the following resolution regarding 

asset forfeiture: 

It is the policy of the National Association of Criminal Defense Lawyers that the 
seizure of a person's assets by the government should be treated in exactly the same 
way as the seizure of a person, and all the protection afforded by the Bill of Rights 
should apply. 

Several basic safeguards should be incorporated into all forfeiture schemes, especially the federal 

one, after which so many states pattern their own: 

> The burden of proving that forfeiture law applies should always be on the government just 
as it is in criminal prosecutions. The degree of proof required should be proof beyond a reasonable 
doubt. At the very least, it must be higher than the current mere probable cause standard. 

> Hearsay should not be allowed in the government's case. 

>• In the absence of exigent circumstances, the government should be required to justify a 
seizure of property to a court before, not after, the seizure is made. 

>• The cost bond should be eliminated. 

>■ Post-seizure probable cause determinations on demand should be instituted. 

>-Deadlines for property owners to comply with procedural requirements should be longer. 

y- The government should be required to promptly notify owners of the government's intent 
to forfeit property, and should be required to promptly commence a judicial forfeiture proceeding 
upon receipt of a claim — in a manner similar to the requirement under the Speedy Trial Act. 

>• Provision should be made for the temporary release of seized property to the owner, vfhcK 
the claimant can demonstrate to a court that a substantial hardship will result if the property is not 

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so released during the pendency of the action. 

> Forfeiture laws should recognize that innocent people often incur huge expenses in 
defending their property against wrongful seizure. Forfeiture laws should include an "early exit." 
innocent owner provision. This would allow a case to be dismissed when an innocent part> shows 
that he has an ownership interest in the property, and the government has no proof that the person 
was in\olvement in the alleged criminal conduct. 

> Forfeiture of real property should always require that there be a substantial nexus between 
the alleged unlawful activity and the property seized. 

>• Congress must acknowledge that forfeiture is a quasi-criminal action. Most people do not 
realize that, under current laws, a citizen can be found not guilty (indeed, may not even be charged 
with a crime), and nevertheless have her property taken by the government. 

>-The United States government should be liable for the loss of use, and any deterioration 
of an asset in cases where the claimant prevails. 

H.R. 1916 incorporates many of these essential safeguards, and NACDL supports the effort 
reflected in the bill. 
v. Conclusion 

We look forward to working with you, Chairman Hyde, and with the Committee, to achieve 
meaningful reform through H.R. 1916. We thank you again for affording us this opportunity to 
participate in this hearing on the need for civil asset forfeiture reform. 



30 



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ATTACH. MEM A 



NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS 
F( RFEITURE ABUSE TASK FORCE 
SECTION BY SECTION ANALYSIS OF 
THE DEPARTMENT OF JUSTICE'S PROPOSED FORFEITURE ACT OF 1996 



Section 101. 

Time for Filing Claim; Waiver of Cost Bond. 

Claimants should not be required to set forth "how and when" their ownership interest 
was acquired. In a proceeds case this would often be ver^' burdensome. Claimant may have 
to explain how and when he acquired dozens of items of property. He shouldn't have to do 
this even before a complaint is filed when he may not have counsel or counsel has just been 
retained. 

The cost bond requirement should be completely eliminated or at least greatly 
reduced. The cost of hiring an attorney is sufficient incentive not to pursue frivolous claims. 

Section 103. 

Judicial Review of Administrative Forfeitures. 

19 U.S.C. 1609(d) should allow claimants to proceed under Fed. R. Crim. P. 41(e) as 
well as by filing a separate civil action. Many or most claimants in this situation are 
proceeding pro se and are incapable of filing a civil suit. 

The claimant should have to establish that he had "no other actual notice of the 
forfeiture proceeding within the period for filing a claim." He will always have constructive 
notice through publication but that is constitutionally insufficient where the agency could 
have given him personal notice but fails to. 

The claimant should not have to establish that the seizing agency failed to comply 
with the notice requirements of 19 U.S.C. 1607. That section merely requires the agency to 
send written notice to each party who appears to have an interest in the seized property. 
Virtually all of the reported notice cases finding a due process violation deal with the 
situation where the agency technically complies with §1607 but makes no effort to actually 
get the notice letter to the property owner once the letter is returned to the agency by the 
postal service as undelivered. 19 U.S.C. 1609(d) should require the claimant to establish that 



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the seizing agency failed to lai<e reasonable steps to locate and sen c iiim w ith wrinen notice 
and that he had no other actual notice of the forfeiture proc( ,'ding within the period for filing 
a claim. 

Section 105. 

Preservation of Arrested Real Property. 

This seems to be an attempt to nullify much of the United States Supreme Courts 
Good decision. The point of Good is that the government can't interfere in this way with the 
owner's right to use his property without going through an adversary hearing. The 
government has said that Good has not been a problem. Why then does it need this? 

Section 108. 

Prejudgment Interest. 

United States shouldn't be allowed to use seized cash to reduce its borrowing needs 
and then refijse to disgorge that benefit if it loses the case. This provision should codify the 
holding in United States v. $277.000 U.S. Currency . 69 F.3d 1491 (9th Cir. 1995). 

Section 121. 

This section is an attempt to codify a lot of case law. In our view, much of that effort 
is unnecessary. 

Complaint. 

There should be a statutory provision barring the pursuit of a second forfeiture action 
simultaneously or successively. If the burden of proof is going to be preponderance in both 
cases what purpose is served by the pursuit of two forfeiture actions and how can it be 
justified? 

Time for Filing Complaint. 

This is the place to include a 90 day time limit for filing the complaint ~ after claim 
and bond are filed. Time can be extended for good cause shown before 90 day period 
expires. 



315 



Claim and Answer. 

We object to requiring the claimant to set forth in his claim facts supporting his 
standing. It's too burdensome and will give the government cheap victories where the 
claimant inadvertently fails to comply. In most cases standing isn't an issue. Where it is, the 
government can readily obtain the same facts and more thorough discovery filed v, iih th^ 
Complaint. 



Standing. 

We also object to the provision making the court the sole arbiter of the facts relating 
to standing questions. That would diminish the right to trial by jury. 



Burden of Proof. 

Burden of proof provision is ok, but let's give the courts some guidance on what a 
'"substantial connection" is ~ at least by way of legislative history. Congress needs to clarify- 
that making (let alone receiving from some notoriously suspect informant) some telephone 
calls from a house isn't a substantial connection, for example. 



Aftlrmative Defenses. 

If this provision is enacted the government will argue that a claimant has waived any 
defense not set forth in the answer. Civil forfeiture procedure already contains numerous 
traps for the unwary, ill-equipped, or ill-counseled claimant. There is no reason to create 
another one. Many claimants are forced to represent themselves for lack of fiinds. Even 
claimants represented by counsel usually have attorneys who know little if anything about 
the complex civil forfeiture law. At the time an answer must be filed they are often unaware 
of potential defenses to forfeiture. 



Use of Hearsay at Pretrial Hearings. 

We don't have a problem with the use of reliable hearsay at pretrial proceedings but 
there should be no hard and fast rule protecting the identity of the CI. If the government is 
seeking summary judgment based on a CI's statement, the owner should have the right to 



316 



impeach the CI. and to take his deposition. Moreover, the government clearl> can't use 
otherwise inadmissible hearsay at ah Dn a motion for summarv' judgment -- b> the terms of 
Rule 56(e). Congress needs to make it clear. What sort of .pre-trial hearings are 
contemplated here anyway? 

Adverse Inferences. 

There's no way we can agree to the adverse inference provision. As this is a 
constitutional question, it also seems inappropriate to try to address it in the statute. 



Preservation of Property Subject to Forfeiture. 

Why is it necessary to give the court power to enter restraining orders, create 
receiverships, etc., if property is under seizure? If it is realty, then James Good pre\ents the 
court from doing these things without a Good hearing. 



Release of Property to Pay Criminal Defense Costs. 

We have only one problem with this part of the draft ~ the court is prohibited from 
considering any affirmative defenses at the hearing. Why should that be? Good allows 
affirmative defenses to be considered even at a pre-seizure hearing, which is earlier in time. 



Excessive Fine.s. 

No problem except for the timing. Why must claimant wait until the conclusion of 
the trial? There aren't many cases that go to trial. Usually a claimant would raise an 
e.xcessiveness issue in his opposition to the government's motion for summary judgment or 
in a cross-motion for summary judgment. 



Applicability. 

Not applying these provisions to forfeitures under the customs laws is a major 
drawback. Couldn't they get Treasury on board? 



317 



Rebuttable Presumptions. 

Major problems with this provision. We don't see why the government needs these 
presumptions to prove its cases and the presumptions would allow it to seize and forfeit huge 
sums of money that is "clean." The presumptions appear to allow the government to 
dispense with any showing that the elements of §1956 or §1957 are proven! 

As a practical matter, only the government has access to proof of whether the foreign 
country's bank secrecy laws have rendered the United States unable to obtain records relating 
to the transaction by judicial process, treaty or executive agreement. The courts would have 
to take the government's word for it. 

If the country where the transaction takes place or was intended to take place satisfies 
both subparagraph A and subparagraph B, then the government would forfeit the money 
without more! This is mind-boggling. 

We have a simpler proposal. Why not just make it illegal to transfer any money — 
clean or dirty -- to specified bank secrecy countries. Any money transferred in violation of 
the law would be subject to forfeiture. That would take care of the offshore tax havens. 

Section 122. 

Time for Filing Claim and Answer. 

How is "actual notice of the execution of the process" to be provided to claimants? 
Right now there's no way to find out when process was executed except by periodically 
checking the file in the Clerk's Office to see when the deputy marshal's return was filed. 
Process is often executed after the receipt of the complaint. 

Section 123. 

Uniform Innocent Owner Defense. 

The exclusion of customs cases fi-om this provision is objectionable. The forfeiture 
statutes without innocent owner provisions are mainly customs statutes in title 19 and 3 1, so 
this does not really deal with the problem. 

From our point of view, the DOJ proposal for the uniform innocent owner defense is 
a step backward, because it reduces the protections for innocent owners that are currently 



35-668 96-11 



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found in the CSA, the INA and the Money Laundering Act. We prefer to keep the actual 
knowlcdge/vvilll.il blindness standard in current law. See NACDL s detailed critique of 
the same provision in DOJ's draft Forfeiture Act of 1994. Attachment B. 

The government's proposal would severely limit the innocent owner defense for those 
who acquire a property interest after the act giving rise to the forfeiture. Only BFPs who 
"did all that reasonably could be expected to ensure that the purchaser was not acquiring 
property that was subject to forfeiture" would qualify for relief Innocent donees and heirs, 
who are presently protected, would be out of luck, no matter what their equities were. The 
innocent homemaker would lose everything she has. The government's proposal would also 
abolish defenses based on state property law. Tlie innocent homemaker with a community 
propert>' interest in the forfeitable property would get nothing. 

Proposed 18 U.S.C. 983(c) significantly alters current law with respect to standing. 
Currently bailees and beneficiaries of constructive trusts have standing to contest the 
forfeiture. The proposed §983(c) specifically denies those potential claimants standing. We 
see no reason for this. The courts have imposed standing requirements on bailees designed 
to thwart money couriers from hiding the identity of the bailor. That is enough. 

Proposed 983(d) would require the courts to enter orders severing tenancies by the 
entireties and joint tenancies and transferring the property to the government for sale, or 
converting joint tenancies and tenancy by the entireties property to a tenancy in common, 
irrespective of state law. The innocent homemaker would lose all interest in her home if it 
was purchased with drug money because she wouldn't qualify as a BFP. 

How about this scenario?: Mr. Jones uses his home, bought with clean money, to 
facilitate a drug transaction thereby making it subject to forfeiture. Thereafter, Jones meets 
and marries innocent young woman who becomes owner of home by the entireties with 
husband. Later, government seizes home for forfeiture. Innocent Mrs. Jones loses the roof 
over her head because she isn't a BFP. She is thrown out in the street with her young 
children. 

Section 124. 

Stay of Civil Forfeiture Case. 

The proposed change to 21 U.S.C. 881(1) would make it too easy for the government 
to obtain a stay of the civil forfeiture case and remove the district court's discretion in the 
granting of stays. Case law requires the government to make a specific showing of the harm 



319 



it will suffer without a stay and why other methods of protecting its interest are insufficient. 
See e.g.. In re Ramu Corp. . 903 F.2d 3 12, 32 ' (5th Cir. 1990). The language in the proposed 
bill would require the court to grant a stay if it determines that civil discovery or trial could 
possibly have an adverse affect on a related criminal investigation or prosecution. That 
would almost always be the case. 

We approve of proposed §881(I)(2), which allows the claimant to seek a stay. (He 
already can under the case law.) We would clarify the language, however. Claimant ought 
to be able to get a stay when, in order to effectively defend the civil forfeiture case, claimant 
must testify and thereby risk self-incrimination. The courts have held that placing the 
claimant in that difficult situation does not violate the fifth amendment privilege, however. 
So the proposed language ("infringe upon the claimant's right against self-incrimination") 
doesn't accomplish what DOJ's Stef Cassella apparently thinks it does. 

Proposed §881(I)(5) would allow the government to make all its requests for stays ex 
parte and under seal. This is obviously unacceptable. It would effectively prevent the 
claimant from challenging or rebutting the prosecutor's arguments in favor of a stay. 

Section 125. 

Parallel Civil and Criminal Cases. 

This provision doesn't specifically authorize the civil forfeiture and the criminal case 
to be joined for trial. Isn't that what the government wants to allow? It might be a good 
idea. Suggestion: where the two cases are joined for trial, allow the judge to appoint the 
same CJA counsel to handle both matters, at least at the trial stage. That would prevent the 
defendant from prejudicing his criminal case by being forced to appear /7ro se in the civil 
forfeiture case tried by the same jury. 

Section 131. 

Seizure Warrant Requirement. 

Proposed 18 U.S.C. §98 1(b)(3) greatly increases the government's flexibility in 
deciding where to seek a seizure warrant but restricts claimants to the district where the 
warrant was issued if they want to file a motion for return of seized property. This isn't fair. 
The government has U.S. Attorneys and agents in every district. It would be allowed to 
choose the district most favorable to itself and make the claimant litigate any motion for 
return of seized property in that district, however inconvenient and expensive for the 



320 



claimant. 21 U.S.C. 881(b) would be amended to conform to the new §98 Kb). 

Where a person is arrested or charged in a foreign country . the government could 
apply under §98 1(b)(5) to any federal judge or magistrate in the United States for an ex parte 
order restraining property subject to forfeiture in the United States for up to 30 days, which 
period could be extended for good cause shown. This provision invites completely 
unrestricted judge shopping. The government will go to judges or magistrates who it knows 
will rubber stamp their requests. 

The government should be required to apply to a judge or magistrate in the district 
where the defendant's property is found. The provision is also objectionable because it 
provides no mechanism for the owner to be heard at any time. Through successive 
extensions of the original order a defendjint's property can be frozen for a lengthy period of 
time without giving him any opportunity to be heard. 

Finally, this provision would allow the government to freeze property without any 
showing — even an ex pane showing — that there is probable cause to believe the property 
is subject to forfeiture. This is very likely unconstitutional. 

Section 132. 

Civil Investigative Demands. 

This provision is unacceptable for the reasons stated in our critique of the draft 
Forfeiture Act of 1994, which was never submitted to Congress. It's a terrible idea. See 
Attachment B. 

Section 135. 

Currency Forfeitures. 

Proposed 21 U.S.C. §881(m) would create a rebuttable presumption that seized 
currency is forfeitable drug money in two circumstances. Neither circumstance justifies the 
presumption. For the reasons explained in David Smith's book (and even in the DEA's own 
forfeiture manual), the close proximity of personal use quantities of drugs proves little or 
nothing. The presumption would allow agents to seize any marijuana user's cash or pocket 
change, thereby inviting abuse. 



I 



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The second set of circumstances is more reasonable but still no cigar. Even under the 
current probable cau s standard, case law holds that the mere fact that a traveler offers a false 
explanation for his possession of the currency isn't enough by itself to prove its drug money. 
It could easily be money derived from or intended for some other unlawful activity. We're 
concerned that the presumption would give some dishonest agents (or police, when the 
provision is copied on the state level) an incentive to fabricate "false explanations'" secure 
in the knowledge that only the claimant can contradict their testimony. 

W^hile purporting elsewhere to raise the burden of proof to a preponderance, this 
presumption would effectively lower it again — to a level below probable cause . 

Section 201. 

Standard of Proof for Criminal Forfeiture. 

Rather than lowering the burden of proof in all criminal forfeitures to a 
preponderance. Congress should clarify that the burden of proof under 21 U.S.C. 853 is 
beyond a reasonable doubt. At the very least, clear and convincing standard of proof is 
needed. 

Section 203. 

Nonabatement of Forfeiture When Defendant Dies Pending Appeal. 

We would limit this provision to forfeiture of the defendant's ill-gotten gains, which 
can be fairly characterized as remedial, not punitive. Where the forfeiture is basically 
punishment, no purpose is served except to punish the defendant's innocent heirs. While 
they should not profit from her wrongdoing, neither should they be punished for it. 

Section 205. 

Motion and Discovery Procedures for Ancillary Hearings. 

This is a useful codification of the case law that has developed. We would modify' 
Section 205(c) to provide: "the court shall permit the parties to conduct discovery in 
accordance with the Federal Rules of Civil Procedure to the extent necessary to reliably 
resolve factual issues before the hearing." The denial of needed discovery would be a denial 
of due process in this non-criminal context. 



322 

Section 206. 

Pretrial Restraint of Substitute Assets. 

While the government understandably wants the power to restrain substitute assets 
prior to trial, we are against it because of our continued doubts about the wisdom and 
constitutionality of substitute asset forfeiture and its large potential for abuse. The same 
Congress that enacted the landmark 1984 forfeiture act refused to authorize substitute asset 
forfeiture because of the same grave doubts. (Substitute asset forfeiture only passed in 1986, 
at the height of the War on Drugs.) If forfeiture is now to be vastly expanded to all title 1 8 
offenses and "proceeds" is to be broadly defined, as proposed by the government, then it is 
all the more imperative that some limitations to be placed on the availability of substitute 
asset forfeiture. One such limitation is to make it impossible for the government to seize or 
freeze substitute assets until the government gets an order forfeiting the tainted property as 
to which substitution is sought. Uncontrolled pretrial seizures and freezes of substitute assets 
allow the government to pauperize most defendants precisely when they are most in need of 
assets to defendant themselves, support their families and post bond. 

Congress should consider other limitations on the availability of substitute asset 
forfeiture. For example, it should clarify that substitute assets may not be forfeited merely 
because the defendant has spent the tainted assets, which is the government's theory in many 
cases. It should be available only when a defendant or his agent takes some action /or the 
purpose of making the tainted property unavailable for forfeiture. 

Congress should also provide that the defendant's primary homestead, up to a value 
of $250,000, may not be forfeited as a substitute asset. This humanitarian limitation will 
prevent substitute asset forfeiture from becoming, in effect. Forfeiture of Estate - the terrible 
common law practice that the Framers abolished more than 200 years ago. 

Section 207. 

Defenses Applicable to Ancillary Proceedings in Criminal Forfeiture Cases. 

This provision would limit third parties to the innocent owner defense spelled out in 
proposed 1 8 U.S.C. §983. While that sounds reasonable and logical, it isn 't. If a third party 
owns the property - rather than the criminal defendant ~ then the property simply cannot be 
forfeited in an in personam criminal proceeding against the defendant in which the third 
party has no opportunity to be heard. The ancillary "hearing" is no substitute for a civil 
forfeiture proceeding. In a civil forfeitiu-e proceeding against the third party's property, the 



10 



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property owner enjoys many valuable rights he does not have in a post-conviction ancillary 
proceeding. He has a right to full civil discovery under the Federal Rules, and a righ to trial 
by jury, at which the government will have the burden of proof by a preponderance of the 
evidence. In the ancillary hearing, by contrast, there is no right to discovery, no right to a 
jury trial and the third party has the burden of proof. This severe limitation of third party 
rights is professedly justified (and we do not think it can be justified at all) on the theory that 
the criminal trial jury has found that the property belongs to the criminal defendant and is 
subject to forfeiture. But once a third party establishes that he is in fact the true owner of the 
property, the justification for the criminal forfeiture order against the criminal defendant 
vanishes — and this is so without regard to whether the third party is "innocent. " 

The government's remedy, if it still wants to forfeit the third party's property, is to 
bring a civil forfeiture action against the property. Then the third party will have to establish 
his innocence or some other defense to forfeiture. The government should not be allowed 
to destroy the constitutional rights of third parties by letting the ancillary hearing serve as a 
substitute for a full-fledged civil forfeiture proceeding. 

Recognizing these problems, DOJ proposes to deal with them in Section 216 of its 
bill. Section 216 would deem the juicillary proceeding an in rem proceeding for the purpose 
of adjudicating the third party's interest. DOJ would place the burden of establishing 
forfeitability on the government, where it belongs. However, there is no provision for 
discovery under the Federal Rules (discovery would be granted only in the discretion of the 
judge) and no provision for trial by jury. We would support Section 216 if it is modified to 
require opportunity for ample discovery and provide a right to trial by jury. 

Section 209. 

Criminal Seizure Warrants. 

This little provision would vastly expand the government's ability to seize property 
in criminal forfeiture cases. If enacted, the government would routinely seize all allegedly 
forfeitable property prior to indictment or at the time of indictment. It should be kept in mind 
that the criminal forfeiture statutes also allow substitute assets to be forfeited, a drastic 
remedy not available in civil forfeiture cases. Because of the broad and loosely worded 
substitute asset provisions of our forfeiture laws, the government would regularly be able to 
seize all of a criminal defendant's property prior to indictment, thereby destroying his ability 
to defend himself and support his family. We should not entrust prosecutors with this 
awesome power. Indeed, as we explained above, prosecutors should not even be granted the 
power to restrain substitute assets prior to trial, much less to seize them. Rather, Congress 



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should clarify that current 21 U.S.C. §853(0 does not authorize pre-trial seizure of substitute 
assets - something the courts hav. assumed from the fact that Congress did not authorize 
pre-trial restraint of substitute assets. 

The government has been using civil forfeiture mechanisms to seize property for 
ultimate criminal forfeiture. It can continue to do that. 

We note that the government has included a provision (Section 212(a)(2)) attempting 
to deal with some of these concerns. It provides that if substitute assets are restrained, "the 
court may exempt from the restraining order assets needed to pay attorney fees, other 
necessary costs of living expenses, and expenses of maintaining the restrained assets.'" If the 
word "may" was changed to "shall" the provision would blunt some but by no means all of 
my concerns about the pre-trial restraint of substitute assets. 

Section 212. 

Hearing on Pretrial Restraining Orders; Assets Needed to Pay Attorney's Fees. 

Like so much of this bill, section 212 tracks the language of the aborted Forfeiture Act 
of 1994 (§130). Our detailed critique of §130 of the 1994 bill is still valid and need not be 
repeated here. See Attachment B. Even with respect to assets needed to obtain counsel, 
the DOJ proposal would give a defendant far less protection than the courts have held to be 
constitutionally required. £^, United States v. Monsanto . 924 F.2d 1 186 (2d Cir.) (en 
banc), cert, denied . 1 12 S.Ct. 382 (1991); United States v. Michelle's Lounge . 39 F.2d 684 
(7th Cir. 1994). 

Section 214. 

Appeals in Criminal Forfeiture Cases. 

The government wishes to be able to appeal from every order denying a criminal 
forfeiture except where the Double Jeopardy Clause prohibits an appeal. Rather than 
awaiting and trusting the Supreme Court to apply double jeopardy principles sensibly in this 
context. Congress should explicitly provide that the government may not appeal from a no- 
forfeiture verdict by the trier of fact, and may not appeal from an order granting a Rule 29 
motion which prevents the forfeiture issue from going to the jury. In other words. Congress 
should ensure that a "no forfeiture" verdict is treated exactly the same as a "not guilty" 
verdict for double jeopardy purposes. 



12 



325 

Section 216. 

Ancillary Proceeding as in rem for Purposes of Third Party Interests. 

See the discussion above, under Section 207. 

Section 301. 

Forfeiture of Proceeds of Federal Offenses. 

In its 1994 analysis, NACDL did not oppose the concept of forfeiting ill-gotten gains 
(net profits) of all criminal offenses provided that forfeiture procedure is made fair and there 
are adequate protections for innocent owners. See Attachment B. We see no reason to 
change that position. DOJ still would define '"proceeds" in the broadest possible fashion {see 
Section 302 of the bill), making the provision highly punitive and unreasonable. See our 
1994 analysis at pages 2 1-22 for a critique of this proposal. Attachment B. The unfairness 
of forfeiting gross proceeds (as opposed to net profits) is greatly aggravated by the substitute 
asset provisions and the judicially developed concept of joint and several liability. Each 
defendant in a criminal venture or conspiracy becomes jointly and severally liable for the 
entire amount of the gross proceeds received by all participants in the criminal venture -- 
usually a staggering sum that allows the government to wipe out the assets, clean or not, of 
every defendant. 

One possible compromise would be to place the burden of going forward with respect 
to the cost of goods sold on the claimant/defendant and to disallow any deduction for indirect 
or overhead costs. The defendant or claimant is in the best position to know what his costs 
were, not the government. The government would not need to prove the absence of direct 
costs in a case in which the defendant or claimant has not pointed to costs that should be 
deducted from his gross proceeds. See United States v. Ofchinick . 883 F.2d 1 172, 11 82 (3d 
Cir. 1989), cert, denied . 1 10 S.Ct. 753 (1990). 

If we support a vast expansion of the concept of proceeds forfeiture, DOJ should 
support an amendment to the excessively broad money laundering statutes. DOJ would no 
longer have to prove so-called "money laundering" to obtain forfeiture of criminal proceeds 
so there would be no reason to retain the money laundering statutes in their present absurd 
form. They should be limited to what is actually money laundering and should not 
criminalize (and severely punish) the mere act of depositing tainted money in a bank account 
(18 U.S.C. 1957) or the mere deposit of such money "with the intent to promote the carrying 
on" of the underlying unlawful activity (18 U.S.C. 1956(a)(1)(A)). These provisions have 



13 



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been routinely abused to tremendously escalate the punishment of those who engage in the 
underlying ii lawful activity at the whim of line prosecutors. 

One other problem with the term "proceeds" is its application to certain offenses that 
do not generate any ill-gotten gains. The best example is the obtaining of a bank loan based 
on an application containing one or more false statements in violation of 18 U.S.C. 1014. 
The entire "proceeds" obtained from such a bank loan are currently subject to civil forfeiture 
under §982(a)(2), whether or not the owner ever defaulted on the loan. This statute is so 
obviously unfair that the government has seldom used it, but it remains available for abuse. 
Congress should examine each section of Title 18 carefully to determine whether the 
adoption of "proceeds" forfeiture across the board would create similar problems. 

Section 303. 

Forfeiture of Firearms Used in Crimes of Violence and Felonies. 

How would 1 8 U.S.C. 924(d) mesh with proposed 1 8 U.S.C. 98 1 (a)( 1 )(D)? Wouldn't 
§924(d) be completely superseded by §98 1 (a)( 1 )(D)? What is the purpose of proposed 
§924(d)(4)? We don't see what it accomplishes. 

Section 308. 

Forfeiture for Violations of Section 60501 and 1960. 

We adhere to our 1994 critique of this provision. See NACDL Section by Section 
Analysis of DOJ's Proposed Forfeiture Act of 1994 at pages 18-19. Attachment B. In 

our view, current 18 U.S.C. 981(a)(l)(A)'s language is far too broad and invites abuse. As 
explained in David Smith's forfeiture treatise, at ^5.01[1]: the broad language of that 
provision has been held to authorize seizure and civil forfeiture of entire legitimate 
businesses simply because the business's bank account was involved in a so-called "money 
laundering" or structuring offense. At most, the entire bank account involved in the offense 
should be subject to forfeiture, not the entire business that owns the bank account. 

Section 313. 

Forfeiture of Criminal Proceeds Transported in Interstate Commerce. 

This provision would allow forfeiture of "any property involved in" a violation of 18 
U.S.C. 1952(a)(1), which prohibits interstate or foreign travel or use of the mail to distribute 

14 



{ 



^ 327 

] 

the proceeds of any unlavvftil activity listed in § 1952(b). Congress should limit the forfeiture 
to the actual proceeds. The extremely 1 road '"any property involved in" language would 
allow forfeiture of any conveyance used to transport the proceeds or perhaps any bank 
account into which the proceeds are deposited. If the proceeds were distributed at someone's 
residence, prosecutors would argue that the residence is subject to forfeiturf^ since 't 
"facilitated" the offense. Some courts might agree with that interpretation, s-aujin^ unuuc 
hardship on persons unfortunate enough to fall within those jurisdictions. 

Section 403. 

Minor and Technical Amendments Relating to 1992 Forfeiture Amendments. 

The DOJ would amend 18 U.S.C. 984(b) to extend the period of time in which an 
action to civilly forfeit substitute flinds may be commended. Currently the forfeiture suit 
must he filed within a year of the offense that is the basis for the forfeiture. DOJ would 
merely require a seizure within two years of the offense. This change would undercut the 
rationale of §984. As the legislative history of §984 explains, the purpose of the short 
limitations period is to provide some basis for believing that the substitute funds are likely 
to be tainted. 

Section 409. 

Statute of Limitations for Civil Forfeiture Actions. 

We can see why the government would want the limitations to run from the time the 
involvement of the property in the offense was discovered, rather than from the time the 
offense is discovered. But the government doesn't need, and shouldn't be given, five years. 
Three years is more than enough time. The statutory language should also reflect the explicit 
requirement (being read into the statute by case law) that the government exercise reasonable 
diligence in investigating the case. The courts have iield that under § 1 62 1 , the time begins 
to run as soon as the government is aware of facts that should trigger an investigation leading 
to discovery oft! c offense. 

Section 416. 

Fugitive Disentitlement. 

This section of the bill would overrule the Supreme Court's unanimous decision in 
Degenv. United States . 1996 WL 305720 (June 10, 1996). Before the ink on the decision 



15 



328 



is dry, DOJ is asking Congress to overrule it! This seems to be DOJs (over)reaction to everN 
adverse decision on a rule of law. Maybe it ought to stop and think ab ut whether the 
decision makes sense (or is constitutionally based), before running to Congress. Moreover, 
while in Degen. the Supreme Court did not have to decide whether disentitlement of a 
fugitive forfeiture claimant would violate due process, there is a strong argument that it 
would. For instance, the Seventh Circuit previously so held. See United Stales — V'v.v, ,,^? 
m I inited States Currencv . 32 F.3d 1151 (7th Cir. 1994). 



16 



329 



ATTACHMENT B 

NATIONAL ASSOCIATION OF CRIMINAL DEFE \SE LAUTERS 
FORFEITURE ABUSE TASK FORCE SECTION BY SECTION AN.ALYSIS OF 
THE DEPARTMENT OF JUSTICE'S PROPOSED FORFEITLTIE ACT OF 1994 



I. Section 101 . Timing of Notice of Intent to Forfeit. 

A. Subsection (d)(1). There is no valid reason why the time requirements proposed by 
DOJ should not also apply to United States Customs. Customs seizures include most currency 
seizures at or near borders and at most major airpons around the country', pursuant to Title 31 
United States Code. Customs is also involved in seizures based on Title 19 violations. 

B. Subsection (d)(2). This provision is reasonable and we have no objection to the 
proposed amendment, subject to the proposed changes to sec.ion (d)(3). below. 

C. Subsection (d)(3). While we agree that a 60 day notice provision is appropriate, 
DOJ's proposal is actually a substantial step backu'ard from current DOJ policy. Pursuant to 
DOJ Executive Office for Asset Forfeiture Directive 93-4 (Januar\' 14. 1993; effective March 
1. 1993), if the seizing agency does not give notice withm 60 days, then it must renim the 
property and cannot proceed with the forfeiture ("Where a reasonable effon of notice has not 
been made within the 60 day period and no waiver has been obtained, the seized property must 
be reain.ed and the forfeiture proceeding terminated ."). 

Contrary to the position assened by DOJ in its section-by-section analysis (at page I). 
the changes to the statute proposed in this section should confer substantive rights on claimants. 
Indeed, DOJ acknowledges in Directive 93-4 that prompt notice is a fundamental aspect of due 
process ("A fundamental aspect of due process in any forfeiture proceeding is that notice be 
given as soon as practicable to apprise interested persons of the pendency of the action and 
afford them an opportunity to be heard.") As currently proposed by DOJ, a claimant would 
have no real remedy for a violation of the time limit, other than the return of the property while 
the forfeiture is pending. This is patently unfair. There is no valid justification for not 
confemng substantive rights on claimants, because DOJ's proposed amendment contains 
adequate safeguards to protect the seizing agency where it can establish good cause for an 
extension of time. See Section (d)(2), above. Indeed, DOJ offers no explanation of why the 
proposed amendment should not confer substantive rights. 

Simply returning the property to the owner does not remedy the problems caused by 
lengthy delays in instituting forfeiture proceedings. If the government is free to pursue the 
forfeiture at any time up to five years from the date of discovery that the property is subject to 
forfeinire (the applicable statute of limitations), the owner of the property is left in an untenable 
position. For example, the owner doesn't know whether to continue making payments, repairs 
or improvements to the property. The problem will be exacerbated if the statute is further 
amended to provide for the forfeiture of assets traceable to such property (See Section 203, 
infra. ) 



35-668 96-12 



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Accordir jly. DOJ's proposed amendmeni should itself be amended to read as loUows 

(d)(3) It [he seizing agency fails to provide notice to the pany 
from whom the propeny was seized within the time limits set forth 
in this subsection and no extension is granted pursuant to 
subsection (d)(2). the seized anicle shall be returned to that pany 
pending funhcr forfeiture proceedings and the foifeiture may not 
take place unless (A) the property consiitutoG the proceeds ot q 
crimina l offenao. (B) (A) an independent basis exists to retain the 
anicle as evidence of a violation of law, or {€) (B) the anicle 
constimtes contraband or other property the possession of which 
would be illegal. 

2. Section 102 . Time to File Claim and Cost Bond; Waiver. 

A. While the expansion of the time in which to file a claim is "velcomed. there is no 
reason to expand the content of the claim to require "the time and circumstances of the 
claimant's acquisition of the interest in the propeny." 19 U.S.C. §1608 currently requires only 
that the claim state the claimant's interest in the propeny (e.g., ownership, possessory, 
leasehold, etc.). Tliere is no valid reason to expand this requirement, and DOJ does not offer 
any explanation justifying this proposed change. 

B. The requirement of a cost bond [subsection (b)] should be eliminated in its entirety, 
rather than simply creating exceptions. The cost bond requirement has long since outlived it5 
usefulness. There is no real danger of frivolous claims being filed, because of the high cost of 
hiring counsel and litigating forfeimre claims. The only reason DOJ is unwilling to see this 
provision eliminated is because it knows through experience that the bond requirement poses a 
serious impediment to the average claimant to contest a forfeiture. Under current law. if no 
bond is posted, the claimant forever waives his or her right to contest the forfeiture in coun. 

Given that the Supreme Coun has held that forfeitures constinite punishment {Austin v. 

United States. 509 U.S. , 125 L.Ed.2d 488, 113 S.Ct. 2801 (1993)). a propem' owner 

cannot constitutionally be required to post a cost bond as a condition of contestmg the forfeiture 
in coun. (See DOJ analysis. Section 110: "Such a change is warranted in light of the 
recognition by the couns that the civil forfeimre actions are punitive in namre and serve as 
adjuncts to criminal law enforcement") The right of free access to the courts should not be 
dependent on the claimant's wealth. Many people of modest m.eans, who do qualify as indigent, 
are nevertheless unable to raise sufficient cash to post a bond within the shon amount of time 
allowed, and thus no bond should be required to contest a forfeiture in coun. 

C. The "waiver" language in subsection (b) "all supponing infonnation as required bv 
the agency " is ambiguous and overly broad. Further, the proposed amendment vests too much 
discretion in the Attorney General and Secretary of the Treasury with regard to waiver (or 
reduction) of the cost bond. There are no provisions for judicial review of the denial of a 
waiver. 



331 



There are also no provisions to de^' with the problem of the seizing agency requiring 
multiple bonds where multiple items of property are seized, even though there will only be one 
coun proceeding. What often results is that the claimant must file several bonds, amounting to 
several, or even tens of thousands of dollars, which far exceeds the amount of costs that may 
be incurred. 

.Accordingly, NACDL strongly urges Congress to completely do away wuh the cost bond 
requirement as proposed in the Hyde bill. 

3. Section 103 . Time to File Action in District Court. 

A. A time limit imposed on the govemrrjf^nt for filing forfeimre actions is long overdue, 
and we strongly suppon the concept. However, §(k)(l) siiould require the action to be instimted 
within si.xty (60) days, not ninety (90) days. If the government has trouble instimting the action 
within 60 days, it has the protections set forth in §(k)(2). 

B. Section (k)(2) should be amended by inserting the word "good" before cause on the 
third line. 

C. Like DOJ's proposed Section 101, this amendment is not intended to confer any 
substantive rights on claimants, and provides the claimant with linle or no remedy if the 
government does not file the action within 90 days. We strongly urge that Section (k)(3) 
confirm substantive rights, and that it be amended as follows: 

(3) If the Attorney General fails to instimte a forfeiture action 
within the requisite time period and no extension is granted, the 
propeny shall be remmed to the party from whom it was seized 
unless (A) the property constitut e s the proceoda of a criminal 
off e nse, (B) (A) an independent basis exists to retain the article as 
evidence of a violation of law, or (€) (B) the article constitutes 
contraband or other property the possession of which would be 
illegal, and the forfeiture may not take place. " 

Such an amendment would be consistent with existing law for the seizure of conveyances 
for drug related offenses. 21 U.S.C. §888(c). DOJ's analysis refers to this provision (see last 
full paragraph, page 3) but neglects to state that that provision requires the action to be 
filed with 60 days, not 90, and that it prohibits the subsequent forfeiture if the time 
requirements for filing are not met. Thus, DOJ's representation that its proposed amendment 
makes 21 U.S.C. §888(c) unnecessary and that it should be repealed "in the interest of 
uniformity" is, at best, misleading. 

D. Similar amendments should be made to Sections (n)(2) and (n)(3) [DRUG 
FORFEITURES] to make them consistent with (k)(2) and (k)(3), above. 

E. The proposed amendment extending the time in which to file an answer [Section (d)] 
is reasonable and welcomed, and we urge its adoption. 



332 



4. Section 104 . Stay of Civil Forfeiture Action. 

A. The uovenunent should be required to establish probable cause in an advcrsariai 
hearing that the propeny is subject to forfeiture before obtaining a stay (this is e'^pecially true 
if the claimant must establish standing before requesting a stay). Othenvise. the claimant may 
be deprived of his or her propeny for several vears. without ever being afforded a hearing to 
contest the seizure. Even if the Claimant ultimately prevails, the losses occasioned by such a 
delay are irreparable As recently observed by the United States Supreme Coun; 

The purpose of an adversary hearing is to ensure the 
requisite neutrality that must inform all governmental 
decisionmaking. That protection is of panicular imponance here, 
where the Government has a direct pecumary interest in the 
outcome of the proceeding. . . Moreover, the availabilit\' oi a 
postseizure hearing mav be no recompense for losses caused bv 
erroneous seizure . . . And even if the ultimate judicial decision 
is that the claimant was an innocent owner, or that the Government 
lacked probable cause, this determination, coming months after the 
seizure, "would not cure the temporary deprivation that an earlier 

hearing might have prevented." Doehr, supra, at . 115 

L.Ed. 2d 1, 111 S.Ct. 2105. 

United States v. James Daniel Good Real Propeny, 510 U.S. , 126 L.Ed. 2d 490, 504-05, 

114 S.Ct. 492 (1993) 

B. There is no good reason to relax the requirement of "for good cause shown." 
Consequently, we recommend that subsection (a)(l)(i) be amended to add the word "unduly 
before the word "infringe" in the fourth line. 

C. We welcome the amendment to make the request for stay reciprocal, although we 
note that the courts have been willing to grant stay requests for claimants despite the absence 
of express stamtory language. However, serious questions are raised by the proposed 
amendment. For example, how is the Claimant supposed to establish that there is a related 
"investigation." Investigation of whom? Is it sufficient merely to assen that there is an 
investigation? If the claimant assens that there is an investigation, does the government get to 
respond in camera? Doesn't the mere fact that the property has been seized suggest that there 
is going to be, or already is, some investigation pending? 



5. Section 105 . Narrowing of Statutory Innocent Owner Defense. 

In her October 18, 1993 letter to Rep. Jack Brooks (D-TX), Chairman of the iiuuse 
Judiciary Committee. Attorney General Reno stated that DOJ's forfeiture reform proposals 
would "improve current procedures to insure fairness and due process to all innocent owners." 



-4- 



333 



DOJ now prCf-oses to all but abolish the stacutor.' innocent owner defense, which protects 
property owners who lack knowledge that their properrv is being (or will be) used for an 
unlawful purpose. DOJ proposes to replace the current statutors' defense with a much more 
narrow defense -- one which requires the property owner to demonstrate not merely that he or 
she lacked knowledge of the illegal activity and was not willfully blind, but that he or she took 
all reasonable steps to prevent the property from being put to illegal use. In short. DOJ 
proposes to limit the defense to the bare constiaiiional minimum allowed by the Supreme Coun 
in Calero-Toledo v. Pearson Yacht Leasing Co.. 416 U.S. 663. 688-690. 40 L.Ed. 2d 452, 94 
S.Ct. 2080 (1974) (it would be difficult to reject the constioitional claim of an owner who 
proved not only that he was unmvolved in and unaware of the wrongful activit>'. but also that 
he had done all that reasonably could be expected to prevent the proscribed use of the properr.'.) 

Thus, the "one uniform innocent owner defense" (see DOJ's Section-by-Section analysis 
at p. 7; proposed by DOJ is the minimal due process defense already afforded by the constimtion. 
Far from "insuring fairness to innocent owners." DOJ would saddle innocent owners with what 
even DOJ concedes is a more onerous burden of proving that they did all that they could 
reasonably be expected to do to prevent the proscribed use of the their propert>'. 

At oral argument in Austin v. United States, 113 S.Ct. 2801, 125 L.Ed 488 (1993), 
several justices questioned how the forfeiture of an innocent persons property could be deemed 
"excessive" under the Eighth Amendment's Excessive Fines Clause. In other words, those 
justices could not reconcile claimant Austin's position with the traditional view expressed in the 
Calero-Toledo decision, which is based on the legal fiction that an m rem action is one against 
inanimate property. The Coun's unanimous ruling in favor of Austin thu? clearly casts doub: 
on the continued vitality of the Calero-ToLdo decision. See also, Sheldon v. United States, 7 
F.3d 1022 (Fed. Cir. 1993) (accepting Takings Clause argument rejected by the Supreme Coun 
in Calero-Toledo). Following Austin, it is difficult to believe that there will be many cases 
where the forfeiture of an innocent person's property on the ground that he or she failed to 
exercise the highest standard of care would not be deemed excessive. Thus, the onerous 
standard proposed by DOJ would be unconstitutional in the vast majority of cases. 

Entirely apan from these constitutional problems. DOJ's proposal is simply bad policy. 
It would require every property owner to investigate the background of persons with whom they 
conduct business if there was anything even the least bit "suspicious" about the other party or 
the proposed transaction. Such a burden of investigation is unrealistic, impractical, and most 
imponantly, unfair. It would impose unnecessary costs on legitimate businesses and accomplish 
nothing - except the occasional forfeinire of an innocent person's property when a prosecutor 
decides that die person deserves to be punished for not conducting an adequate investigation or 
for not taking sufficient precautions. 

We agree with DOJ that it would be desirable to create a uniform statutory innocent 
ov/ner defense. However, that defense should be based on the current stamtory defense for 
innocent owners found in 21 U.S.C. §881(a) and 18 U.S.C. §981(a)(2). the f"" .tiost imporum 
civil forfeiture stanites. We also agree with DOJ that there should be a separate defense for 
innocent owners based upon lack of consent, as is currently interpreted bv the majorit\' of 
circuits (but whjch is not currently found in §98 1(a)(2)) The majority of federal circuits have 
held that an owner mav avoid forfeiaire bv estabiishine either lack of knowledae or lack of 



334 



consent. See. e.g.. United States v. 6109 Grubb Road. £06 F.2(l 61S. 625 (5rd Cir. 1989): 

United States v. 141si Street Corp.. 911 F.2d 870, 878 (2nd Cir. 1990i, cen. denied. U.S. 

, 111 S.Ct. 1017. 112 L.Ed. 2d 1099 (1991); United States v. One Parcel of Real Estate a: 

1012 Germantown Road. 963 F.2d 1496 (11th Cir. 1992). This, we believe, is the corrc:: 
application of the defense. 

We also agree that when an owner learns that his or her property was or is being used 
in the commission of an illegal act, he or she should be required to do "all that reasonably could 
be expected to terminate such use of the property." This however, is very different than 
imposing an onerous duty of investigation on al! propeny owners. 

In sum. like DOJ, we propose that a uniform innocent owner defense be adopted to apply 
to ail forfeiaires. We therefore propose that DOJ's proposed §983 itself be amended to read as 
follows: 

"§983. Innocent Owners. 

(a) An innocent owner's interest in property shall not be forfeited 
under any civil forfeiture statute. 

(1) With respect to a property interest in existence at the time the 
illegal act or omission giving rise to forfeiture took place, a person 
is an innocent owner if: 

(a) that person did not know of, and was not 
willfully blind to, the act or omission giving rise to 
forfeimre; or 

(b) that upon learning of the act or omission giving 
rise to the forfeiture, he or she d'H all that 
reasonably could be expected under the circum- 
stances to terminate such use of the property. 

(2) With respect to a property interest acquired after the act 
giving rise to forfeiture has taken place, a person is an innocent 
owner if at the time that person acquired the interest in the 
property that person did not know of. nor was willfully blind to. 
the act or omission giving rise to the forfeimre, or the fact that the 
property was subject to forfeimre. 

Finally, we believe it would be useful to create a safe harbor provision that would assure 
innocent property owners of protection where, having acquired knowledge of illegal activity 
involving their property, they take reasonable steps to terminate the illeghl use. We would 
suggest Congress consider the safe harbor provision in the March 15. 1994 Draft Uniform 
Controlled Substances Act (Anicle V - Forfeimre), which provides as follows: 



1/ 



335 



Reasonable measures to prevent a [wrongdoer's] conduct or assist its 
prosecution include, to the extend permitted by law: 

(1) notifying an appropriate law enforcement agency of information that 
led the owner to know the conduct would occur and other information the law 
enforcement agency reasonably requests to prevent or prosecute the conduct; and 

(2) revoking permission for the [wrongdoer] to use the property or taking 
reasonable actions in consultation with a law enforcement agency to discourage 
or prevent the illegal use of the property, provided that a person shall not be 
required to undertake any action which may threaten any person's personal 
security or safety. 

This safe harbor provision would not preclude a claimant from showing lack of consent in some 
other fashion. 



DOJ also wants a different standard to apply to owners who acquire property subsequent 
to the unlawful conduct giving rise to forfeiture, even where the owner had no knowledge of the 
pnor activity. The United States Supreme Coun recently held that a donee can be an iimocent 
owner, and that anyone acquiring an interest in property prior to the government's title vesting 
in the property following a decree of forfeiture can raise any defense that would have otherwise 

been available. See, United States v. A Parcel of Land, etc.. 307 U.S. , 122 L.Ed. 2d 469, 

113 S.Ct. 1126 (1993). There is no reason to treat donees differently than bona fide purchasers. 
Donees have just as much right to be secure in their ownership of property received as a gift, 
devise, or bequest as do bona fide purchasers. Nevertheless. DOJ now wants to legislate away 
the Supreme Court's holding, but does not proviae any justification for such a change. 

DOJ's proposed subsection (d), which provides for forfeimre of property jointly held, 
is unreasonable and unacceptable. It constitutes an assault on long established and time honored 
state law principles of property ownership. DOJ offers no valid reason for interfering with state 
property laws. 

DOJ's proposed subsection (e), which provides a rebuttable presumption that a financial 
institution acted "reasonably" under ceruin conditions, is reasonable. 

6. Section 106 . Judicial Forfeitures of Real Property. 

■We have no objection to this proposal, which amends 19 U.S.C. §1610 to require that 
all forfeitures relating to real property be done through judicial proceedings, rather than 
administratively. 

7. Section 107 . Review of Administrative Forfeitures. 

This proposed amendment, which would require the seizing agency to review the 
evidence supporting probable cause for forfeiture even where no claim is filed, is reasonable and 
appropriate. However, if the cost bond requirement is not eliminated, there should also be a 
provision allowing judicial review of an administrative decision of forfeirare in contested cases. 



336 



8. Section IPS . Preservation of Arrested Real Property. 

As dratted by DOJ. this provision is clearly unconstiaitional See. Uniied States v. James 
Daniel Good Property et at., supra. This amendment will compon with due process onlv if, 
prior to the issuance of any such order, the government establishes probable cause for the 
seizure at an adversarial hearing. 

9. Section 109 . Elimination of Right to Article III Judge in Smaller Cases. 

As DOJ points out. this amendment will only work where the panies consent to waive 
jur\'. due to the Seventh Amendment right to a jury trial. However, DOJ fails to recognize that 
a claimant also has a constitutional right to a bench trial before an Article III judge. The 
Supreme Coun has held that the question of whether Anicle III allows Congress to assign 
adjudication of a cause of action to a non-Anicle III tribunal is the same as the question whether 
the Seventh Amendment permits Congress to assign adjudication to a tribunal that does not 
employ juries as fact finders. Granfinanciera, S.A.. v. Nordberg, 492 U.S. 33, 53-54 (1989) 
Thus. DOJ's proposal is consiinitionally deficient. 

Clearly, there should be a right to a jury trial in civil forfeiture proceedings, indeed, the 
S'Lamte should make the right to a jury trial explicit in al] forfeiture cases. Under current law, 
forfeitures of vessels on certain navigable watcri are not subject to jury trials. There is no 
modem justification for treating the forfeiture of vessels differently from other types of property, 
(consequently, the stamte should be amended to e.xpicisly provide the right to a jury trial in aU 
forfeitures. 

Further, existing law already allovv-s forfeimre cases (including forfeitures involving more 
than 510,000) to be tried by a magistrate with the panies consent. Accordingly, there is no 
reason to alter existing law The solution to the problem of handling small cases is for DOJ to 
be more aiscruninating in the cases it adopts for seizure -- not to pass unconstitutional 
legislation. 

10. Section 110 . Burden of Proof; Adverse Inferences; Rebuttable Presumptions. 

A. We wholeheartedly support a change which would place the burden of proof on the 
seizing agency, but we believe that the constimtion requires, in light of Austin, supra, that the 
standard of proof should be at least by clear and convincing evidence, as proposed in the Hyde 
bill (H.R. 2417). 

B. Standing . We reject DOJ's proposal that would require the claimant to establish 
standing pre-trial, for several reasons. First, DOJ's proposal violates the constimtion's Seventh 
Amendment right to a jury trial on this issue. Ownership is currently an issue for the jury. F':^'- 
example, in cases where the claimant has initially denied ownership of thi." property, t.he claimant 
should be able to explain the circumstances to a jury. 



337 



Second. DOJ proposes in other sections of the bill to iii..it the definition of who is an 
owner, or who has standing to contest a foneiture. For example, DOJ proposes to legislate 
away the Supreme Court's decision in A Parcel of Land, supra, to deny standing to all but bona 
fide purchasers. 



C. Hearsay . Hearsay should not be admissible in forfeiture proceedings. A majority 
of courts currently allow hearsay to establish probable cause justifying the seizure of the 
property and the instinition of the forfeiture action. But even these couns bifurcate the probable 
cause hearing, so that the hearsay does not come before the jury. 

However, since DOJ agrees that the burden of proof should be on the seizing agency by 
a preponderance of the evidence (Section 105), the justification for allowing hearsay evidence 
in the forfeiture trial no longer exists. Questions regarding the legality of the seizure, in which 
hearsay may be admissible, can be litigated pre-trial in the form of motions to suppress, or for 
return of property pursuant to Fed.R.Crim.Pro. 41(e), thus eliminating the justification for the 
use of hearsay at trial. 

Generally, hearsay is inadmissible under the Federal Rules of Evidence. These rules 
expressly declare that they "apply generally" in all federal coun cases, unless otherwise provided 
in the rules themselves. E.R. 1101(b). E.R. 1101(e) expressly provides that the rules of 
evidence apply to proceedings under "pan IV of the Tariff Act of 1930 (which includes 19 
U.S.C. §1615). See generally. D. Smith, Prosecution and Defense of Forfeiture Cases, *[11.03 
[5]. See also, Jones v. U.S. Drug Enforcement Administration. 819 F.Supp. 698, 721, n. 24. 
(M.D. Tenn 1993). 

D. Section (d) (Affirmative Defenses) is unnecessary. 

E. Section (e) (Adverse Inferences) in unreasonable, and clearly unconstimtional. There 
may be no adverse inferences drawn from the legitimate exercise of Fifth Amendment privilege. 
This is especially imponant in view of the fact that the Supreme Court has held that forfeimres 
are punishment. See, Austin v. United States, supra; Boyd v. United States, 116 U.S. 616, 29 
L.Ed. 2d 746 (1886). 

F. Section (g) (Rebuttable Presumptions). The DOJ giveth (burden shift), and the UUJ 
taketh away (rebuttable presumptions). These rebutuble presumptions have the practical effect 
of putting the burden right back on the claimant, rendering illusory DOJ's proposed burden shift. 

(1) Subsection (m). DOJ's comparison to 21 U.S.C. §853 is absurd. The 
presumption under §853(d) arises only with respect to a person who has been 
convicted (found guilty beyond a reasonable doubt) of a felony drug trafficking 
offense. DOJ wants to extend this presumption to cases where the seizing agency 
merely establishes by a preponderance that the person was engaged in an offense. 
Furthermore, there is no need for such a provision, because the DOJ can use the 
"net worth" method of proof. 



-9- 



338 



'2) The presumptions in subsection (b)(1) and (b)(2) are equally onerous, 
for the same reasons. Section (b)(2) makes no sense. Does this mean that just 
because money was separated into amounts of less than $10,000. without any 
attempt to conduct a financial transaction, it is subject to forfeiture for violation 
of §5324? 



11. Section 121. Use of Grand Jury Information for Civil Forfeitures. 

Subsection (a). There is no valid reason to extend the use of grand jury information by 
government attorneys to civil forfeiture cases. (The provision the FIRREA Act of 1989 
authorizing such use should be repealed.) 

The grand jury is not a tool for civil enforcement by the government. United States v. 
Sells Engineering. Inc.. 463 U.S. 418. 103 S.Ct. 3133. 3142 (1983). Expansion of this section 
will permit the government to surreptitiously expand the evidence gathering function of grand 
juries to gather evidence for civil forfeiture cases. Grand jury secrecy rules will preclude 
effective oversight. Legitimate challenges will also be difficult because of the grand jury's 
legitimate investigation of criminal forfeitures. 

This proposal would permit the government to utilize the investigatory powers of the 
grand jury while forcing cl-T'-^ints to rely on the cv'W discovery process. After obtaining grand 
jury information, the government could then elect to pursue civil forfeiture remedies which have 
lower burdens of proof and more limited subpoena power. Civil subpoenas availabli- to 
claimants can be served only within 100 miles of the courthouse. The government would, on 
the other hand, be able to compel evidence from all judicial districts. 

The government can freely elect between civil and criminal forfeiture. However, 
claimants in civil forfeinire cases are bound by strict filing deadlines and bond requirements. 
Innocent owners are also limited by the federal discovery rules and relevancy requirements that 
do not apply in the grand jury. The government could, therefore, obtain all the investigative 
advantages of pursuing criminal forfeitures and later benefit from the lesser burdens of proof 
applicable in civil cases. 

Under this proposal, the government could also gather its evidence through the grand jury 
and then obtain a stay of civil forfeiture proceedings (See §104, supra), effectively preventing 
claimants from gathering evidence because of the pending criminal proceeding. 

Grand jury material is not needed by the government in civil forfeiture cases because 
civil discovery is available to the government as well as to claimants. Furthermore, the 
government can get already obtain grand jury materials under Fed.R.Crim.Pro 6(e) upon a 
proper showing of need. 

Subsection (b). The same arguments are made against expanding the use of grand jury 
materials in administrative forfeitures. 



-10- 



339 



12. Section 122. Civil Investigative Demands. 

There is no valid reason, and DOJ has offered none, why it is necessary to establish an 
inquisitorial method of obtaining information from citizens in civil investigations. DOJ 
proposes, in the context of civil enforcement, to provide a procedure analogous to the issuance 
of a gr:.r,d jury subpoena that allows the government to gather evidence before the filing of a 
civil complaint. A civil proceeding is not a criminal prosecution. Most of the constimtional 
protections guaranteed to criminal defendants do not attach in civil foneitures. Under DOJ's 
proposal, the government would not even have to have an aniculable suspicion of any 
wrongdoing, and the prosecutor conducting the inquisition would not be subject to any coun 
supervision, or other safeguards traditionally associated with grand jury proceedings. Thus, the 
government should not be permined to bring the intrusive powers of law enforcement to bear 
in civil forfeimre proceedings. 

Contrary to DOJ's assertions, the government does gather evidence for use in civil 
forfeiture cases by way of their criminal investigations. These investigations, which include 
extensive interviews of witnesses provide substantial investigative information not available tc 
claimants. The government also retains its ability to conduct discovery after the civil complaint 
IS filed. Additionally, the goverrunent may file a civil forfeiture complaint and have the action 
stayed pending the outcome of any related criminal proceeding (See §104, supra). At the 
conclusion of the criminal case, the government will have available all the evidence gathered by 
the United States for the cruninal case. Claimants, on the other hand, are limited by the civil 
discovery rules and the 100 mile limitation on subpoenas power in civil cases. 

The scope of the civil demand here is broader than even the civil investigative demands 
authorized under RJCO, 18 U.S.C. §1968. This demand authorizes the government to 
administer oaths and compel testimony as well as compel the production of documents. The 
current RICO provision (Section 1968) only authorizes civil demands for the production of 
documents. DOJ's proposed amendment goes far beyond anything ever contemplated by 
Congress and far beyond any even remotely similar existing provision. There is no valid 
reason to expand the government's authority to compel evidence before a complaint is filed in 
a civil case. The proposed section also reduces the period for filing a petition opposing 
compliance to as shon as five days. Under RICO, a party may file a petition up to 20 days after 
service. 

The notification provisions of Subsection (d) prevent notification under circumstances that 
have historically been limited by stamte and confined to criminal investigations leading to 
indictment. Use of the information has also been limited to the grand jury. There is no valid 
law enforcement reason to extend this authority to civil investigations by the government. 

The government's financial interest in the outcome of civil and criminal forfeiture 
proceedings provides additional motive for overreaching where disclosure of the demand is 
prohibited. Congress has carefully regulated access to financial and credit information. There 
is no valid reason to permit the secret gathering of private information before the filing of a civil 
complaint where the grand jury process is available to investigate crime. 



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13. Section 23. Access to Records in Bank Secrecy Jurisdictions. 

The reason ottered by DOJ for this proposal is not valid because the claimant would still 
have to prove the legitimate source of the funds just as he or she would if the funds were held 
in an .Kmerican bank It will not be sufficient for the claimant to simply say that funds have 
jomc from a lecitimntj account Proof of ownership of the funds will always be required. 

There is no valid reason to treat non-production of foreign account information any 
differently that any other failure to comply with a legitimate discovery request Under the 
Federal Rules of Civil Procedure, a pany can move the coun for appropnate relief for an 
opposing party's failure to comply. Each case should be determined on its own merits as are 
all present discovery disputes. 

14. Section 124. .Access to Ta.\ Records. 

For the reasons previously stated, civil forfeiture investigations should net be treated in 
the same manner as criminal investigations. The government's financial motive, as well as the 
lack of coun supervision over civil investigations, strongly militates against expanding criminal 
investigative authority into the area of civil enlorcement. 

15. Section 125. Civil Forfeiture Seizure Warrant Authority. 

Subsection (a)(2)(ii) should be changed by adding the words "judicially recognized" prior 
to the word "exception". 

Subsection (a)(5) would authorize ex pane orders restraining property when a person is 
arrested or charged in a foreign country to permit the government to gather information to obtain 
probable cause. .All that need be alleged is the nature and circumstances of the foreign charge 
and "the basis for belief" that the person arrested has property subject to forfeimre in the United 
States. This provision is probably unconstitutional in that it permits the restraint or seizure of 
property without notice or a hearing in the absence of probable cause. Restraining orders and 
seizure may not be obtained in criminal cases without probable cause. There is no legitimate 
reason to authorize restraint or seizure without probable cause for die enforcement of civil 
foneimres. 

Section (b) [Drug Forfeicures] doesn't make sense. Subsection (b)(4) provides for seizure 
without process. Thus the proposed amendment "and requests the issuance of a seizure warrant" 
doesn't belong here. The second pan of this amendment should be changed to read: "the 
Attorney General has probable cause to believe that the property is subject to civil forfeiture and 
a judicially recognized exception to the warrant requirement exists." This makes it clear that 
the determination of the existence of an exception to the warrant requirement must be made by 
a coun {i.e.. it is not sufficient that the AG believes, no matter how reasonable fhat belief, that 
an exception applies). 

We strongly agree that an amendment is necessary in light of the Second Circuit's well 
reasoned opini9n in ilm'.ed Siaies v. LaSanta. 978 F.2d 1300 (2nd Cir. 1992) recognizing Lhat 
there is no "forfeiture" exception to the warrant requirement, and that the Anomey General may 

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not seize propeny based solely on probable cause, absent some recognized exception to tne 
warrant requirement. 

16. Section 130 . Hearings on Pretrial Restraint of Assets. 

Section 130 addresses the circumstances under which a coun. after 
pane restraining order freezing a defendant's assets, can hold a heanng to consider the need tor 
such property restraints. The overwhelming majority of federal courts have held that due 
process requires that a coun hold such a hearing. 

This proposal seeks to unduly limit the ability of a coun to mi 
restraining order to circumstances in which (i) the defendant needs the restrained assets to pay 
legal fees; (ii) the order restrains assets that are not alleged to be forfeitable in the indictment; 
or (iii) the order cause irreparable harm to the property owner and less intrusive means e.xist to 
preserve the property for forfeiture. This proposal expressly forbids the coun from entertaining 
challenges to the probable cause finding of an indictment, forbids application of Rule 65 of the 
Federal Rules of Civil Procedure, and bars third panies from raising facnial challenges to the 
validity of the restraining order. 

Under existing laws, courts issue pretrial restraining orders under their broad equitable 
powers, and traditional equitable doctrine requires a court to consider all relevant evideiice in 
the exercise of its equitable discretion. Further, equity, and due process, require that the j)any 
who seeks to justify injunctive decrees bear the burden of proving their necessity. 0OJ's 
proposal would strip federal courts of their equitable powers in an effon to reduce dramatically 
the burden of proof that the government must shoulder to freeze all of a defendant's assets. 
Most couns apply Civil Rule 65 to determine whether preliminary mjunctive reliei is appropriate 
in criminal forfeiture cases; Section 130's prohibition on application of Rule 65 is a reflection 
of the fact that DOJ does not want to be held to the same standard as every other litigant seeking 
equitable relief, but rather wants to have a grand jury make all the decisions concerning the 
propriety of pretrial restraining orders. 

DOJ's analysis offers no explanation for why it cannot satisfy the traditional requirements 
for equitable relief, nor does it explain why the DOJ needs to hamstring the exercise of equitable 
discretion of trial couns by narrowly limiting the procedures, evidence, and criteria they can 
consider in modifying ex pane restraining orders. 

As to the specific provisions proposed by DOJ, we have the following comments: 

Paragraph (3)(B) unduly limits the grounds upon which modification of a restraining 
order may be sought where the right to counsel of choice is not implicated. It permits 
modification only where 1) the propeny restrained "would not be subject to forfeiture even if 
all of the facts set fonh in the indictment were established or true" or 2) u cauic:, u reparable 
harm to the moving parry and less intrusive means exist to preserve the subject property for 
forfeinire. 



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The problem is that most mdiciments contain wholly conciusor ;oneinj .• allegations 
tracking the language of the forfeiture statute without even senmg forth the acnial legal theor> 
upon which the forfeiture is predicated, much less the evidentiary or factual basis for the 
forfeiture. In many cases the government seeks forfeiture of propeny that is plainly not subject 
to forfeiture because the prosecutor doesn't understand the law of foneiaire or else simply 
makes the broadest forfeiture ..negations possible without carerully considenng individual 
propeny items. Evidence regarding the forfeiture allegations is often not presented at all to the 
arand jury, which simply rubber stamps the indictment. 

Given this reality, the standard established in paragraph (3)(B) is meaningless and 
unworkable. It assumes incorrectly that "facts" will be "set forth in the indictment." which, if 
"true. " would make the propeny subject to forfeiture. But what happens when the indictment 
sets forth no facts at all regarding the forfeiture allegations? Is the property owner then to be 
deprived of an opportunity to seek modification of the restraining order that has been issued ex 
pane !* 

Even if some facts are set fonh regarding forfeiture, the grand jury generally hears little 
or no evidence to suppon those facts so the indictment should not be presumed valid with respect 
to forfeiture. A famous judge once said that "a grand jury would indict a ham sandwich if asked 
to do so by a prosecutor. " Defendants and third panics should have the right to argue that there 
is no legal or factual basis for forfeiture of panicular assets and to require the government to 
show probable cause for forfeiture of those assets at a pretrial hearing. In other words, there 
is no reason to insulate the forfeimre aspect of the indictment from all challenge even where the 
right to counsel of choice is not implicated. 

Paragraph (3)(C) should also provide that if a restraining order is modified to permit the 
defendant to use a panicular asset to retain counsel the government may not later seek foneimre 
of that asset. Counsel should not have to run the risk that the asset e.xempted from the 
restraining order may ultimately be forfeited. 



17. Section 131 . The Standard of Proof. 

We strongly oppose this proposal to drastically lower the govenunent's burden of proof 
in criminal forfeiture cases from beyond a reasonable doubt to a mere preponderance of the 
evidence. DOJ offers no policy reason for this radical change in the burden of proof. Nor does 
it assen that it has had a problem meeting the current beyond a reasonable doubt standard. 

Instead, DOJ's section-by-section analysis claims that the current burden of proof is 
unclear and treats this as a "clarifying" amendment. DOJ provides a completely distoned 
summary of the case law to support its position. Under current law it is clear that the burden 
of proof is beyond a reasonable doubt in al] criminal forfeiture cases. The only "ambiguity" 
concerns forfeiture of drug proceeds under 21 U.S.C. § 853(a)(1). Some circuits have 
misconstnied § 853(d), which creates a rebuttable presumption respecting drug proceeds, as 
lowering the ultimate burden of proof to preponderance of the evidence where facts triggering 
the presumptiop are present. The § 853(d) presumption plainly has no application to facilitation 
cases under § 853(a)(2) or enterprise forfeiture under § 853(a)(3). 

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Instead of lo\^ .ring the burden of proof for all criminai forfeitures. Congress should 
delete § 853fd1 altogether. The provision is constitutionally infirm for the reasons stated in 2 
D. Smith, Prosecution and Defense of Forfeiture Cases *i 14.03. 

18. Section 132 . Early Order of Forfeiture. 

We have no objection to amending Rule 32 {d)(2) of the Federal Rules of Criminal 
Procedure to require an entry of a prelimmary order of forfeiture "as soon as practicable" after 
the verdict of forfeimre is remmed. The proposed amendment should make clear, however, that 
no final order of forfeiture may be entered until all of the defendant's legal challenges to the 
forfeiture have been ruled upon. This would include challenges to the sufficiency of the 
evidence under Rule 29 and excessiveness challenges under the Eighth Amendment. Further, 
there should be no discover.' undenaken by the government with respect to the defendant prior 
to sentencing, and there should be a right to a stay pending appeal. 

We have no objection to the initiation of third party ancillary proceedings commencing 
immediately following the jury verdict on the forfeiture issues. 



19. Section 133 . Non-.Abatement of Criminal Forfeitures. 

We object to the proposal to abolish the ancient common law rule that criminal forfeimres 
abate when tiie defendant dies pending appeal. Couns have properly held that abatement applies 
to criminal forfeitures. Given the punitive purpose of criminal forfeitures, this conclusion is 
sound. The government does not explain why onlv criminal forfeimres - of all c rimina l 
penalties — should not abate upon the death of the defendant. 

DOJ assens that the Solicitor General's office has wrinen memoranda criticizing the 
rationale for abatement in the criminal forfeimre context. However. DOJ does not tell us what 
the Solicitor General's memos actually say — perhaps, we suspect, because their criticism of the 
abatement rule is unpersuasive. If it is persuasive, why hasn't the government ever sought 
Supreme Court review of this issue? Indeed, we see no reason to distinguish between criminal 
forfeimre and civil forfeimres which both serve to punish the property owner. See, United 
Slates V. 547.409.00 In U.S. Currency. 810 F. Supp. 919 (N.D. Ohio 1993) (civil forfeimre 
under 18 U.S.C. 1955(d) abates upon death of the wrongdoer). 



20. Section 134 . Repatriation of Property. 

This section, which authorizes a coun to order a cruninal defendant to repatriate 
forfeitable assets, is entirely unnecessary, as it is already sufficiently covered by existing law. 



21. Section 135 . Codifying Procedures for Existing Ancillary Proceeding. 

This proposal would give parties panicipating in post-trial ancillary proceedings the right 
to file dispositive motions, to conduct discovery, and to perfect an appeal. This section appears 

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CO be reasonable, except tor subsection (D). which would deny third panies the right to an 
irT\mediaie appeal of an adverse judicial determination on their petition tor reiiei if other petitions 
are still pendini: This may work a hardship on third panics, as they may have to wait months 
or years to obtain appellate review of an adverse trial coun finding. 



22. Section iJ6 . Pre-trial Restraint of Substitute Assets. 

This proposal would dramatically expand current statutory authority to impose pretrial 
restraints. Currently, the government can obtain pretrial restraints only on properry that is 
subject to forfeiture. DOJ proposes to extend the power to restrain assets to wholly legitim.Tte 
"substitute" assets. In other words, a defendant would be denied the use pretrial not only of his 
allegedly forfeitable assets, but also his wholly legitimate assets. 

The majority view of the federal appellate courts is that the government may not seize 
or restrain substitute assets. United States v. Floyd. 992 F.2d 498 (5th Cir. 1993); United Slates 

V. Martin. 1 F.3d 1351 (3rd Cir. 1993); United States v. Ripmsky. F.3d (9th Cir. 

1994). 55 CrL 1028. DOJ has offered no explanation for why it needs to freeze wholly 
legitimate assets prior to trial. Such practice will work a substantial hardship not only on 
defendants, but also on numerous inird panies who depend upon or have vested rights in the 
lesitimate property that will be restrained under DOJ's proposal. The hardship imposed upon 
third panies is especially pronounced as they are otherwise barred from protecting their property 
through intervention, and Section 130(a)(D) proposes to limit the ability of a third party to seek 
pretrial modification of a restraining order. 



23. Section 137 . Elimination of Superior Title as a Defense to Forfeiture. 

Under existing criminal forfeinire laws, a third party propeny owner can obtain relief 
from a criminal forfeimre order if he or she can prove that he or she, rather than the convicted 
defendant, owned the property subject to forfeiture at the time the property originally became 
subject to forfeimre because of its unlawful use. Thus, third party propeny owners {i.e., 
property owners who have not been indicted or charged with any criminal conduct but whose 
propeny has nonetheless become the subject of a forfeiture order) cunently have a stamtory 
defense to criminal forfeiture of their property on the ground that they had a "right, title or 
interest" in the property "superior to any right, title or interest of the defendant at the time of 
the commission of the acts which gave rise to the forfeimre of the propeny." 18 U.S.C. 
l963(n)(6)(.A). 

DOJ's proposal would eliminate this defense as it is currently enacted. DOJ would 
condition the defense on an additional showing of innocence, meaning that a tliird party could 
lose their property in a criminal forfeimre case without ever having the oppomimty to esublish 
that the propeny was theirs and not the defendant's. This is grossly unfair, and a violation of 
due process, given the paucity of protections available to third party claimant; P.nrd parties 
(who are not even accused of any misconduct) are barred from panicipating in the criminal trial, 
and have no right to a jury trial on their third party claims, and the burden of proof is on them 
to establish their superior title. Thus, even though a third party may be totally innocent of any 

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wrongdoing, third panics are afforded none of the protections provided to the ci minal 
defendant. Moreover, the purpose of criminal forfeiture -- to punish a convicted defendant (and 
only a convicted defendant) -- is not advanced by forfeiting propeny that belongs to a third parrv 
not accused of anv criminal conduct. 



24. Section 138 . Uniform Procedures for Criminal Forfeiture. 

This section proposes to make the procedures currently applicable to drug forfeiture the 
uniform procedure for all money laundering crimmal forfeitures. This proposal would expand 
existing money laundering law by, inter alia, allowing seizure of allegedly forfeitable property 
prior to conviction in a variety of cases involving financial institutions. .Although we believe 
that some changes may be appropriate here, there should not be a complete incorporation by 
reference of the procedures set fonh in 21 U.S.C. §853. 



25. Section 139 . Seizure Warrant Authority for RICO. 

Section 139 proposes to allow the government to seize (rather than only restrain) 
allegedly forfeitable property pretrial in a RICO prosecution. This would be a substantial 
expansion of the government's forfeinire authority in RICO cases. RICO prosecutions have 
traditionally involved the largest forfeitures because the government is authorized to forfeit the 
emuety of a defendant's interest in legitimate "enterprise" under 18 I S.C. §1963(,3)(2). In 
panicular, the use of pretrial restraining orders under RICO to freeze ongoing businesses has 
been controversial; expanding government authority to include outright seizure of ongoing 
businesses prior to the filing of a criminal case will be even more disruptive and subject to 
abuse. 



26. Section 140 . Automatic Judgment Against Transferees. 

This eleventh hour provision would create an automatic personal judgment against anyone 
who is a transferee of property from a defendant in the amount of property transferred. Under 
the relation back doctrine, property is deemed to have belonged to the government at the time 
it was used in a way which makes it forfeitable. A defendant sometunes transfers the property 
to a third party for ■. alue or by gift prior to the time the government commences its forfeiture 
proceeding. Incredibly, DOJ now proposes to make every third party who obtains an asset from 
a defendant (including bankers, doctors, car dealer, etc.) personallv liable to the government for 
the value of any asset they received from a defendant. The unfairness of this provision is 
palpable, as it will require third panies to pay the government the value of assets for which they 
have already paid value and as to which they have been given no notice that the transfer was in 
any way improper. 

Moreover, the commercial mischief this provision will cause is reason alone to reject the 
proposal. Commercial entities conduct commerce with individuals who later become defendants. 
Um'ortunately , ^these entities typically do not receive notice from either the government or the 
defendant that the assets they are dealing with may become forfeitable at a later date. Complex 

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.•Dmmercial codes have been devised to protect the propeny righis c: those engaged in 
>;ommerce. including the creation of recordation and other notice regimes Section 140 would 
i!ive the government a hidden civil judgment tor the value of assets that will not be apparent to 
anvone. including banks and other credit sources, until long after the defendant has sold or 
transferred an asset. Moreover, this civil judgment against third panies would be automatically 
created in a crunmal proceeding in which the third panics are precluded from panicipatmg 
Such a "judgment " is not wonhy of the name and would be a per se violation of due process. 



27. Sections 201 through 211 . Expansion of the Substantive Scope of Forfeiture. 

Sections 201 through 211 greatly expand the subsuntive scope of forfeiture. While some 
of these provisions are not controversial, others are alarming both for the scope of the proposed 
expansion and for the Department's total ii'iSensitivity to the rights of property owners and due 
process of law. Accordingly, NACDL opposes any substantive expansion of forfeiture unless 
and until the process is made fair and provides adequate protections for innocent owners. .An 
analysis of some of the more controversial proposals follows. 



28. Section 201 . Forfeiture of Proceeds of Federal Crimes. 

Section 201 would expand forfeiture to include the proceeds of evei^- Title 18 offense, 
misdemeanor and felony alike. Currently, only a handful of offenses are covered. 



29. Section 203 . Forfeiture of Traceable Proceeds. 

This section would amend 21 U.S.C. §88 1(a)(4) and (a)(7) to provide for forfeinire of 
proceeds traceable to property (conveyances and real property) which are used, or intended to 
be used to commit, or to facilitate the commission of a drug offense. Under current law, only 
property which is actually used, or intended to be used, is subject to forfeimre. DOJ now 
proposes to expand the forfeimre to property traceable to property used, or intended to be used, 
in violation of Title 21. Thus, the person who used his car to transport drugs (even for his own 
use) and who later sold that car and bought a new car would forfeit the new car under DOJ"s 
proposal. This can. and surely will, lead to draconian results. 



30. Section 207 . Forfeiture for Violations of §60501. 

DOJ and IRS are currently embroiled in a heated dispute with the defense bar over the 
IRS"s stepped up effons to enforce 26 U.S.C. §60501 against defense counsel who file 
incoL.plete IRS Form 8300s. At lea^i ..ine states have specific ethics opnuuns prohibiting 
attorneys from providing the client identifying information requested on Form 8300 absent a 
coun order. Thus, attorneys in those states face a Hobson's choice. 



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In December. 1993. the IRS began unilaterally imposing "ii entional disregard" fmes 
ranging from 525,000 to S 100.000 on attorneys for each refusal to disclose a client's name on 
a Form S30G. The enforcement campaign is continuing at the present time despite the defense 
bar's repeated calls for a truce and a negotiated modus vivendi. 

In a wholly gratuitous slap at the defense bar, DOJ now proposes to make all property 
"involved in" violations of §60501 subject to civil and crmiinal forfeioire under 18 U.S.C. §§ 
981 and 982. This would allow the government to forfeit the entire legal fee — even where paid 
entirely with "clean" money which was fully earned by the attorney -- in addition to potentially 
prosecuting the anomey and levying drastic "intentional disregard" fines. 

It should not be overlooked that defense attorneys would not be the only victims of this 
provision. Legitimate merchants and service providers who fail to file a Form 8300 or file an 
incomplete form would also suffer a drastic forfeinire penalty. 



31. Section 209 . Summary Forfeiture of Unregistered Firearms. 

This amazing provision would amend 26 U.S.C. §5872(a) to allow summary forfeiture 
of cenain dangerous weapons not registered under the National Firearms Act. According to 
DOJ's section by section analysis, this section "would eliminate the need for what are useless 
but costly forfeiture proceedings for unregistered weapons that are popular with drug dealers and 
other criminals" and would allow law enforcement to simply seize weapons and declare them 
forfeited without any further process. DOJ notes that it is allowed to summarily forfeit 
controlled substances which cannot be legally possessed by anyone [21 U.S.C. §881(f)] and it 
apparently sees no difference between a firearm, such as a machine gun, which can be lawfully 
possessed if registered, and a bale of marijuana. 

A law abiding gun collector or gun dealer who has legally registered one of these 
dangerous weapons would have absolutely no recourse for a wrongful seizure and subsequent 
summary forfeinire. He would have no right to notice of the seizure and no oppormnity to be 
heard (not even by the seizing agency) before his valuable gun is summarily forfeited. No doubt 
the NRA will have much to say about this proposal. 

As anyone who regularly defends criminal cases knows, the definitions of firearms in 26 
U.S.C. §5845 are very technical. For example, firearms within the ambit the NFA include a 
shotgun having a barrel of less than 18 inches and a rifie havmg a barrel of less than 16 inches. 
If a shotgun has a barrel 18 inches long it is perfectly legal. If its barrel is 17% inches in length 
it must be registered under NFA. Police conducting searches do not generally carry tape 
measures with them. They typically seize whatever firearms they find. DOJ's proposed 
amendment would allow law enforcement to arbitrarily seize and forfeit rifles and shotguns with 
no proof required (1) that the gun barrel is too short to be legal or (2) that the firearms are not 
in fact registered. According to DOJ, allowing a gun owner to be heard on these questions is 
a costly waste of time! 



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Clearly, .iiis proposal is blatantly unconstitutional, and speaks \oiumes about DOJ's 
mindset. It treats the constitution as an inconveruence to be sidestepped DOJ appears to have 
learned nothing from the Supreme Coun's rebuke in the five most recent foneiture cases to 
come before the Court, or from the torrent of media criticism over forfeiture abuse. 



32. Sections 301 through 315 . So-called Minor and Technical Amendments. 

We, of course, do not oppose those amendments that are truly minor and technical 
corrections to various forfeiture statutes. However, under the guise of being mmor or techrucai 
amendments. DOJ has included some of the most bizarre and dracoman provisions in the entire 
Act. 



33. Section 303 . E.vtension of 18 U.S.C. §984 to Al] Civil Forfeitures. 

We do not oppose the clarifving changes to 18 U.S.C. § 984. However, we vigorously 
oppose the extension of § 984 to all civil forfeitures, which is hardly a "mmor and technical 
correction" to that stamte. To the contrary, it would vastly expand the forfeitability of substitute 
assets in civil m rem cases. Prior to the Annunzio-Wylie Anti-Money Laundering Act of 1992, 
which included the current version of § 984, there was a hard arid fast line between criminal in 
personam forfeinires (where the concept of substitute asset forfeiture was introduced in 1986) 
and civil in rem forfeiture where no asset forfeiture was authorized. Congress, and even the 
Department of Justice, believed that the punitive concept of substitute assets could not and 
should not be extended to civil m rem cases because it ran contrary to the fundamental legal 
theory upon which in rem forfeitures are based, i.e., that the property itself is "tainted" by its 
association with criminal activity. 

Section 984 made a narrowly limited breach in the aforementioned wall separating 
criminal and civil forfeiture in order to deal with a discrete law enforcement problem in the 
money laundering area. Big time launderers move large amounts of cash rapidly in and out of 
bank accounts also containing funds not being laundered, thereby frustrating the government's 
effons to seize the laundered funds. In order to combat such methods, it was thought necessary 
to authorize seizure of substitute cash in the same bank account even if the substitute cash was 
not otherwise forfeitable. However, to prevent abuse of this new authority. Congress required 
that an action to forfeit substitute property under §984 be commenced within one year from the 
date of the offense. Section 984(c). 

In a section by section analysis accompanying Aimunzio-Wylie, Congress acknowledged 
the fundamental distinction between civil and crmiinal forfeiture in this regard and urged that 
that distinction "should be maintained." Having got its nose under the tent, the DOJ now wants 
to expand § 984 to all civil forfeitures, not just money laundering cases. There is no law 
enforcement justification for doing so and DOJ provides none, preferring to slip this major 
chanee in under the smokescreen of "minor and technical corrections." 



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Substitute asset forfeiture should be na rowed or eliminated, not expanded. We believe 
that recent Supreme Court decisions throw the consticutionalit\' of substitute asset forfeiture mto 
serious doubt, panicularly in civil in rem cases. In his concurring opimon m Ausnn v. United 
Slates. 509 U.S. _. 113 S.Ct. 2801, 2815 (1993). Justice Scalia s'tates that the constitutionalit\- 
under the Eighth Amendment of a civil forfeirure turns on whether the relationship of the 
property to the offense is close enough to render it "g-:... ' or "tainted" under traditional 
standards. If Justice Scalia is correct then even the current version of § 984 is unconstitutional. 

See also Alexander v. United States. 509 U.S. . 113 S. Ct. 2766, 2778 (1993) (Kennedy, J. 

dissenting) ("Civil in rem forfeiture is limited in application to contraband and anicles put to 
unlawful use, or in its broadest reach, to proceeds traceable to unlawful activity "). Not 
satisfied with the in rem forfeiture of traceable proceeds, the government now wants to be able 
to civilly confiscate completely untainted funds if the traceable proceeds somehow elude its 
grasp. At some point the almost mindless annual e.xpansion of our forfeiture laws must stop. 
This is a good place to draw a line in the sand and say to the government. "You go no further. " 

The proposed amendment would also gut the salutary one year statute of limitations in 
§ 984(c) and replace it with a requirement that the substitute assets merely be seized within two 
yoais of the offense. § 984(c) currently requires that the forfeiture action be commenced withm 
one year of the offense. As the legislative history of Section 984(c) explains, the purpose of the 
short limitations period is to provide some basis for believing diat the substitute cash is, in fact, 
likely to be tainted. 



33. Section 310 . Expansion of the Term "Proceeds." 

Under the guise of a "minor and techmcal" amendment. DOJ proposes to radically alter 
the definition of "proceeds" in all civil and criminal forfeitures statutes. Courts have 
consistently interpreted the term proceeds to mean net profits, not gross revenues. See, e.g.. 
United States v. Masters. 924 F.2d 1362, 1369-70 (7th Cir. 1991) (RICO); United States v. 
Lizza Industries. Inc.. 775 F.2d 492-499 (2nd Cir. 1985) (RICO); United States v. Milicia, 769 
F.Supp. 877 (E.D. Pa. 1991)(pharmacist convicted of illegally dispensing controlled substances 
was allowed a deduction for wholesale cost of the illegal prescriptions he filled — 60% of gross 
receipts - under 21 U.S.C. §853); United States v. $122,942 Shares of Common Stock of 
FirsiRock Bancorp Inc.. Nos. 92 C 202288 etc. (N.D. 111. March 22, 1994), 55 CrL 1027 (18 
U.S.C. §981(a)(l)(C)). 

This is the common definition of the term proceeds. Forcing criminals to disgorge their 
ill-gotten gains is justifiable, and even desirable, as a remedial measure designed to prevent 
unjust enrichment. However, DOJ now wants to conven all proceeds forfeitures into highly 
pumtive measures by redefining the term "proceeds" to mean "all of the property derived 
directly or indirectly, from an offense or scheme, not just the profit. " Astoundingly, DOJ offers 
no justification for this significant change in the law. while hiding behind the pretense that this 
is a minor or technical amendment designed to promote "uniformity" in the law. 

The example unabashedly provided by DOJ in its Section-by-Section analysis illustrates 
the draconian j'esults of the proposed change. All momes received as the result of a loan 
application containing a single false statement would be forfeitable — even if the bank was fully 

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repaid; the bank was never at risk; and there was no intent to defraud the banki Many decent 
and law-abiding people make some kind of false statement on a bank loan application in the 
belief, correct or not. that the statement will make it more likely that they will obtain the loan. 
DOJ would subject such people to a complete forfeiture of the loan proceeds. Ironically, the 
forfeiture of the loan proceeds might prevent the borrower from repaying the loan to the bank. 
If the loan is unsecured, the bank would have no standing to contest the forfeiture and it would 
be out of luck unless the government chose to grant it relief through the mitigation process. 

The following example is illustrative of DOJ's proposal. Assume a bank loan application 
for a S 100,000 loan contain a false statement, ine b.....^ grants the loan. The borrower ppplies 
the proceeds of the loan to a building project of 51,000.000. The borrower then secures other 
financing (with no false statements), and pays off the first bank. DOJ then learns of the false 
statement in the original loan application. Under DOJ's proposed amendment, the borrower 
would forfeit the entire building project (51,000,000), ghis the 5100,000 loan, even though the 
bank had been fully repaid. Such a result defies logic and reason. DOJ has not offered any 
explanation, let alone justification for this bizarre proposal. 

To make matters even worse, this proposal must be considp""^ in tandem with proposed 
Sectii... 201 , which would vastly expand the number of criminal offenses that allow cnmuiii and 
civil forfeiture of "proceeds". While we do not oppose the concept of forfeiting ill-gotten gains 
(net profits), we strongly disapprove of DOJ's shameless anempt to turn this basically remedial 
concept into an arbitrary punishment. 



-22- 



351 

Mr. Hyde. Well, thank you, Mr. Edwards. 

Before I recognize Mr. Barr for some questions, you heard this 
morning Mr. Komie talk about quotas and you heard a rather vig- 
orous denial from the gentleman from the Justice Department. 
Have you any information to add to that? 

Mr. Edwards. I am very glad you asked the question, Mr. Chair- 
man. Yes, I do. 

I would suggest that the Barr memorandum that was quoted in 
a footnote by the U.S. Supreme Court in the Good decision, while 
it — while Mr. Barr didn't call it a quota, what it was was a memo- 
randum to all the U.S. attorneys saying, we don't want to be em- 
barrassed by not meeting the projections we have made to Con- 
gress. So you guys get on the ball and get this property forfeited 
in a hurry. 

I mean, that is essentially what the memorandum said, and any- 
one who doesn't like my characterization of it, that is fine. They 
can pick up the Good opinion and read it and decide for themselves 
what Mr. Barr was saying. 

I have been told that Attorney General Reno has sent a more 
subtly and discretely worded memo to U.S. attorneys within the 
last year. Now, I have not seen that memo. In fact, I have made 
inquiries to try to get a copy of it. I sispect that, Mr. Chairman, 
you and your staff would have greater success than I. 

But I have been told by a person who said — a reporter who said 
that they had seen this, that a memo has gone out from the Attor- 
ney General, presumably to the U.S. attorneys, that encourages the 
U.S. attorneys to provide adequate asset — adequate attention to 
the job of forfeiting assets. 

Now, again, that is all I can tell you. I am not — since I haven't 
seen it, I do not want to represent what its contents are. That 
would be inappropriate. But I have seen nothing — and I do a lot 
of forfeiture work, and I have seen nothing through the changes of 
administrations that suggests to me that the Justice Department 
and the various law enforcement agencies in this country that have 
forfeiture authority have diminished in their zeal to get property 
from private sources at all. 

Mr. Hyde. It is conceivable that a suggestion that the local U.S. 
attorneys step up their forfeiture action could have bypassed Mr. 
Cassella. Is that conceivable? 

Mr, Edwards. I would think so. I have never worked for the Jus- 
tice Department, but I have had some exposure to bureaucracy. I 
suppose that sort of thing could happen. 

Mr. Hyde. We have had some discussion on the standard of 
proof Clear and convincing is the standard that we have in our 
legislation for the Government to sustain that burden of proof by 
clear and convincing evidence. It seems that the Justice Depart- 
ment is interested in reducing that to mere preponderance, or pre- 
ponderance. 

Mr. Edwards. Yes. 

Mr. Hyde. Do any of vou three have, starting with you, Mr. Ed- 
wards, and Mr. Kappelnoff and Mr. Reed, do you have any com- 
ment on that change if that were to be adopted? 

Mr. Edwards. Well, Mr. Chairman, I would suggest that you got 
it right the first time. Asset forfeiture is punishment. And in the 



352 

Austin decision, the Supreme Court made clear that they recog- 
nized, at least for eighth amendment purposes, that forfeiture was 
punishment. The label is different but, essentially, forfeiture is a 
type of fine. 

Mr. Hyde. And clear and convincing is a midway between beyond 
all reasonable doubt and a mere presumption. 

Mr. Edwards. That is exactly right. 

Mr. Hyde. So it is not the harshest, but it is not the easiest. 

Mr. Edwards. That is correct. 

Mr. Hyde. That was its attraction to us. 

Mr. Edwards. Yes, indeed. And as a trial lawyer, I think it is 
very significant to try a case where the judge, at the conclusion of 
that case, is going to tell the jury something more than it is just 
like getting the ball over the 50 yard line. Maybe you don't have 
to score a touchdown, but you do have to get close enough to the 
goal line that you are persuaded that the proponent of the forfeit- 
ure is right. Ajid it is meaningful, I think, in its impact on juries 
to hear something from the judge that has more to it than prepon- 
derance. 

So I think something — as you say, something in between is very 
meaningful and ought not to be relinquished without very serious 
thought. 

Mr. Hyde. Mr. Kappelhoff. 

Mr. Kappelhoff. We would actually ask for the standard beyond 
a reasonable doubt, but we are also pragmatists and we under- 
stand that you have arrived at this as somewhat of a compromise 
between the two, and we think that's a very common-sense ap- 
proach to this and we believe the clear and convincing standard is 
satisfactory, although we would like it beyond a reasonable doubt. 

And I think why your standard makes sense is, we say this is 
quasi criminal. Well, the Supreme Court, as Mr. Edwards has indi- 
cated, has suggested that there are penal aspects to this. We are 
taking people's property. Sometimes it is the only property they 
have. So to have that additional protection, which is simply — ^you 
know, you even mentioned mere preponderance as sort of a sugges- 
tion that that really isn't quite enough, you are taking the belong- 
ings of people, their property and everything they own. We cer- 
tainly need to have a standard that warrants that, and I think 
clear and convincing does that and I think your approach to it 
made perfectly good sense in your bill when you initially introduced 
it. I think it makes sense today. 

Mr. Hyde. Mr. Edwards was talking about private property, the 
right of private property being at the heart and soul of freedom. It 
is an ancient concept. I suggest it goes back to the Decalogue, "thou 
shalt not steal." It certainly implies the right to own property if 
someone else can steal it. 

Mr. Reed, on the standard of proof? 

Mr. Reed. Well, you have to start first with the background. 
Most States, a majority of States, have a preponderance standard 
and almost all the States rejected a probable cause standard. 

The Uniform Law Commission, the National Conference of Com- 
missioners on Uniform State law, recently enacted a Uniform Civil 
Forfeiture Act and that adopted a preponderance standard. There 



353 

was considerable debate about clear and convincing, beyond a rea- 
sonable doubt, or preponderance. 

Preponderance is a standard that is the basic standard for a civil 
system of justice and that is the standard that the ABA has en- 
dorsed. Now, the ABA has not objected to the clear and convincing 
standard. Quite frankly, it has not deliberated that. But the shift 
from probable cause to preponderance is a shift of a light year in 
terms of what goes on in a courtroom, or whether you will have a 
day in court, quite frankly, given the use of summary judgment 
procedures. 

So I think that the minimum standard, the ABA has certainly 
endorsed as a minimum standard, the preponderance standard. 

Mr. Hyde. Very well. 

Mr. Barr. 

Mr. Barr. Thank you, Mr. Chairman. Mr. Chairman, I want to 
commend you for introducing this legislation, which I support and 
for holding these hearings. 

I have had experience, as have some other members of the com- 
mittee on both sides, both as a prosecutor, a Federal prosecutor, 
enforcing our asset forfeiture laws and as an attorney in private 
practice representing innocent property owners, small businesses, 
small business people who have had their property seized and have 
great difficulty getting it back or even getting into court to get it 
back. So I am very mindful, as are members of this panel, certainly 
in the earlier panels, of the problems in current laws. And I think 
we have had some very enlightening testimony today. 

One thing I have been doing, Mr. Chairman, while I have been 
listening to the testimony from this panel, is going over some of the 
written testimony from the earlier witnesses that I wasn't able to 
be present for because I hadn't gotten in from my district yet, and 
we have covered a number of questions already through the direct 
testimony of these witnesses, as well as through your questions, 
Mr. Chairman, that I had also, in looking through particularly the 
testimony of the Department of Justice and Department of Treas- 
uiy proponents. 

But just one question that we haven't covered, and if any of the 
gentlemen on this panel see the following different than I do, I 
would appreciate learning about it. The Department of Treasury 
representative raised an objection to H.R. 1916, which frankly, I 
had never thought of, and I think I have never thought of it be- 
cause I don't think it's an appropriate one, but I would like to know 
if any of you gentlemen see a problem here. 

They raise an objection raising what I think is sort of a red flag, 
a redherring, of it would endanger the public safety because it 
would impair the ability of the Customs Service to stop dangerous 
food products, adulterated or unlicensed drugs, child pornography, 
illegal firearms, unsafe consumer products, et cetera at our border. 
And I don't read the changes, Mr. Chairman, that we are proposing 
here as in any way affecting the Government's ability to stop those 
products at the border. 

If, in fact, they are what the Department of the Treasury says 
they are, they certainly would fall under the category of things that 
could be seized and forfeiture action presented under this bill as 
well under current law. 



35-668 96-13 



354 

But do any of you gentlemen see really any problem with, if the 
proposal that we have before us today were enacted into law, that 
the public safety would be somehow endangered? 

Mr. Rkk:d. To respond, I don't see any legitimate basis for that 
concern on the part of the Government. The proposal in H.R. 1916 
would not change the standard for seizing property. So if you had 
adulterated milk sitting on the dock, it could be seized under the 
same laws as it is seized today. The only issue that might arise is 
whether down the road the issue of ultimate forfeiture, whether 
that would be by a higher standard. Does that answer your ques- 
tion? 

Mr. Barr. Yes. And, Mark? 

Mr. Kappelhoff. I don't see how that would impact on it. The 
Government has the power, the tools, the resources to seize the 
item and it is later on down the road when this bill, or the law, 
if it becomes enacted, comes into play, not at the inception of the 
seizure. 

Mr. Barr. OK. 

Mr. Edwards. I agree with that. 

Mr. Barr. Again, Mr. Chairman, I think particularly this panel 
has answered a number of questions that I have and, again, I 
would support this legislation. I think it is long overdue and a very 
important piece of legislation that I hope we can get through the 
Congress. 

Thank you, Mr. Chairman. 

Mr. Hyde. Well, I thank you. 

I regret the press isn't here, and I don't mean to be critical of 
the press, but this is an example of if your ox isn't gored, you 
know, who cares? It won't ever happen to me. And this stuff can 
happen to anybody and everybody. When it happens to you, it's too 
late to drum up interest. 

We have been trying to get somebody to give a damn about this 
and we are still trying and we are going to continue to try. You 
have made a great contribution. You have educated us, and any- 
body who has heard what you have had to say — I am going to have 
your testimony written up and I am going to distribute it to certain 
people, journalists, who weren't here today, but whom I wish had 
been here today. 

I found an op-ed piece in the Washington Times very recently 
July 10 by Paul Craig Roberts who has written extensively on this 
issue and he is quoting from a book by someone named Leonard 
W. Levy, a new book called, "A License to Steal: The Forfeiture Of 
Property." And I will quote two paragraphs from it, as if you are 
not angry enough. 

"Asset forfeitures came to prominence in the war against drugs. 
They have not dented drug use, but they have made thieves out of 
law enforcement officers. Mr. Levy recounts how Suffolk County 
New York district attorney, James M. Catterson, drives a swanky 
BMW as his official car instead of a county car. The luxury import 
was part of $3 million worth of property seized by Mr. Catterson. 

"Somerset County New Jersey prosecutor, Nicholas L. Bissell, 
used $6,000 of seized funds, 'for a corporate membership in a pri- 
vate tennis and health club for the benefit of his 17 assistant pros- 
ecutors and 50 detectives.'" And it goes on, and on, and on. 



355 

Now, maybe those seizures were appropriate. This doesn't say. 
You would have to read Mr. Levy's book to see. But the interest 
that law enforcement has is patent here. If you are going to get the 
benefits of what you seize, why the sky is the limit. And everyone 
should have a BMW, I guess, and a tennis membership. 

I think we have uncovered something that has been glaring at 
us for years. We have just noticed it. You have been living with it, 
you folks, and I am most grateful for your contribution, and we 
nave only begun. Thank you. 

The meeting is adjourned. 

[Whereupon, at 3:05 p.m., the committee adjourned.] 



APPENDIX 



Material Submitted for the Hearing 

STATEMENT 

Of 

Roger Pilon, Ph.D, J.D. 

Senior Fellow and Director 

Center for Constitutional Studies 

Cato Institute 

Washington, D.C. 

for the 

Committee on the Judiciary 
United States House of Representatives 

July, 22, 1996 

Mr. Chairman, distinguished members of the committee: 

My name is Roger Pilon. I am a senior fellow at the Cato 
Institute and the director of Cato's Center for Constitutional 
Studies . 

I want to thank Chairman Hyde for inviting me to submit a 
statement to the committee on H.R. 1916, the Civil Asset Forfeiture 
Reform Act. Fundamental reform of America's forfeiture law is long 
overdue. Although this measure, in my judgment, does not go far 
enough, it is a step in the right direction. Chairman Hyde, whose 
recent book on the subject I am pleased to have edited and the Cato 
Institute is proud to have published,^ is to be commended for 
having introduced it and, more generally, for having taken up the 
issue of forfeiture reform when so many in Congress have ignored 
it. 

That the state of our forfeiture law today is a disgrace is 
hardly in question. A body of "law" that enables law enforcement 
personnel to stop motorists and seize their cash on the spot, to 
destroy boats, cars, homes, airplanes, and businesses in often 
fruitless drug searches, and even to kill and maim in the course of 
seizure operations is out of control. Even lawyers, when they come 
upon this area of the law for the first time, are taken aback by 
the injustice--indeed, by the utter irrationality- -of it all. 

About the only people who defend forfeiture law today are 
those in law enforcement who benefit from it, either as a "tool of 
their trade" or, more directly, by keeping the goods they seize- -a 
conflict of interest so stark that it takes us to another age. In 



^ Henry J. Hyde, Forfeiting Our Property Rights: Is Your 
Property Safe From Seizure? (Cato Institute, 1995) . 

(357) 



358 



fact, that is just the problem with modern forfeiture law: in 
practice as well as in theory, its roots are in notions that have 
no place whatever in our legal system, animistic and authoritarian 
notions that countless people have died over the ages to bury and 
replace with the rule of law. 

The very styling of the relatively few cases that make it to 
court tells the story: United States v. $405,089.23 U.S. Currency^- 
United States v. 92 Buena Vista Avenue'; United States v. One 
Mercedes 560 SEL.' Civil forfeiture actions are brought against 
the property, not against the person. They are in rem proceedings - 
-not for the purpose of gaining jurisdiction over a real person but 
for the purpose of seizing property for forfeiture to the 
government. Fantastic as it may sound, it is the property that is 
charged. 

How can that be? Finding its origins in the Old Testament and 
in medieval doctrine, in the idea that animals and even inanimate 
objects involved in wrongdoing could by sacrificed in atonement or 
forfeited to the Crown, modern forfeiture law, filtered through 
early American admiralty and customs law, has simply carried 
forward, uncritically, the practice of charging things. 

Thus, officials today can seize a person's property, real or 
chattel, without notice or hearing, upon an ex parte showing of 
mere probable cause to believe that the property has somehow been 
"involved" in a crime. Neither the owner nor anyone else need be 
charged with a crime, for the action, again, is against the thing. 
The allegation of "involvement" may range from a belief that the 
property is contraband to a belief that it represents the proceeds 
of crime (even if the property is in the hands of someone not 
suspected of criminal activity) , that it is an instrumentality of 
crime, or that it somehow "facilitates" crime. And the probable 
cause showing may be based on nothing more than hearsay, innuendo, 
or even the paid, self-serving testimony of a party with interests 
adverse to the property owner. 

Once the property is seized, the burden is upon any owner who 
wants to get his property back to prove its " innocence" - -not by a 
probable-cause but by a preponderance-of -the-evidence standard. 
Yet that is possible only where innocent -owner defenses have been 
enacted or allowed. In defending the innocence of his accused 
property, the owner must of course prove a negative. Moreover, he 
must do that against the overwhelming resources of the government. 
And if he has been involved in activity that in any way might lead 



^ 516 U.S. 116 S.Ct. (1996) 

' 113 S.Ct. 1126 (1993) . 
^ 919 F.2d 327 {5th Cir. 1990). 

2 



359 



to criminal charges- -however trivial or baseless those charges 
might ultimately pro -e to be- -he has to weigh the risk of self- 
incrimination entailed by any effort to get his property back 
against the value of the property. As a practical matter, the 
burden is simply too high for many innocent owners, who end up 
walking away from their loss. 

That, in a nutshell, is the state of modern American civil 
forfeiture law. It goes after property, not people- -a ruse that 
permits the abandonment of elementary notions of due process. And 
it does so, most notoriously, on the ground that the property is 
guilty of "facilitating" a crime--a doctrine that is infinitely 
elastic . 

Because others will testify before the committee about their 
tragic experiences under this law- -many examples of which are to be 
found in Chairman Hyde's book--let me not give further examples 
here but instead focus on two basic questions: (1) What is the 
legitimate function and scope of forfeiture law? and (2) Does H.R. 
1916 comport with such law? As suggested earlier, I am of the view 
that our civil forfeiture law is fundamentally misguided and 
unsound and that we need for the most part not merely to reform but 
to abandon it, relegating it to the dustbin of history. Because I 
have discussed the basis for that conclusion in some detail in an 
essay that I have made available to the committee,^ let me simply 
summarize my arguments here. 

Only people commit crimes. The so-called personification 
doctrine, which is the basis of our civil forfeiture law, is simply 
too fantastic to be taken seriously. Yet H.R. 1916 does nothing to 
challenge that fiction. Under the bill, the government would 
continue to bring cases not against people but against property. 
In quasi -criminal proceedings, the property would be charged, but 
those proceedings would have few of the safeguards found in true 
criminal proceedings. To be sure, the government would have the 
burden of proving, "by clear and convincing evidence, that the 
property was subject to forfeiture" --no small improvement. But the 
substantive law, the criteria for determining when property would 
be "subject to forfeiture," would remain unchanged. 

The personification doctrine is thus intimately connected to 
the substantive criteria for forfeiture. To see how that is so, 
however, it is useful to look first at the ordinary criminal case, 
where a real person is charged. In such a case, the aim of the 
criminal proceeding is to determine the guilt or lack of guilt of 
the accused and, if guilty, to determine a remedy that will right 
the wrong at issue. Thus, not only compensation for crime victims 
but even punishment is, in this generic sense, "remedial." In 



^ Roger Pilon, Can American Asset Forfeiture Law Be 
Justified? 39 New York L.S.L.R. 311 (1994). 



360 



principle, at least, those and only those who commit crimes must 
emedy their wrongdoing. The remedy is thus a function of the 
wrong to be remedied. 

When we turn to forfeiture law, however, we are invited to 
believe that the property committed some "wrong, " for it is the 
property that is charged and is "subject to forfeiture." Why? 
There are three basic rationales: the fruits of crime; contraband; 
and because the property "facilitates" crime. But are any of those 
rationales remedial? 

Clearly, the first is. If a man robs a bank, he can be made 
to forfeit his ill-gotten gain. Setting aside complications that 
arise from conversions and third-party victims, no one objects to 
forfeiture in this context, not least because the forfeiture is 
less "of the property" than "from the criminal," and is directly 
related to the crime the forfeiture is meant to remedy. The 
forfeiture, in short, remedies the wrong, at least in part. At the 
same time, all of this can be accomplished ordinarily through an 
ordinary criminal proceeding, without resorting to a standard civil 
forfeiture action. 

But if the fruits-of -crime rationale for forfeiture is not 
ordinarily problematic from a remedial perspective, neither is the 
contraband rationale. To be sure, there is always disagreement 
about what should be contraband- -especially, today, regarding the 
never-ending "war on drugs." But once Congress decides to make the 
possession of alcohol, or drugs, or tobacco, or whatever illegal, 
then the seizure for forfeiture of that contraband can be said to 
remedy the "wrong" of possession. 

The facilitation doctrine, however, is quite another matter, 
for when property is forfeited because it "facilitates" a crime- - 
even when it is the property of the criminal himself - -there is no 
obvious connection between the "remedy" and the wrong to be 
remedied. If I make a call from my home to consummate a drug deal, 
how does the forfeiture of my telephone, or my home, or the cattle 
on my ranch, "remedy" that crime? What is the connection, from a 
remedial perspective, between the crime and- -let us be more candid 
than the Supreme Court--the "punishment"? And if that connection 
is missing when it is my property that is being forfeited, it is 
missing a fortiori when the property of some third party is 
forfeited on the ground that the property "facilitated" my crime. 

Today, countless forfeitures take place under the facilitation 
doctrine. The property is personified. It is then said to 
"facilitate" a crime- -however tenuous the connection may be. As a 
result, it is "subject to forfeiture." Never mind that the 
forfeiture will in no way remedy the crime- -especially if the owner 
is not the criminal. Facilitation forfeiture can make no pretense 
at being remedial because it need take no measure of the crime that 
gives rise to it. Minor crimes can lead to major facilitation 



361 



forfeitures. Ships can be forfeited over the discovery of a 
mariji.ana "roach." Apartment buildings, hotels, cars, and second 
mortgages can be forfeited over illegal assignations. 

The facilitation doctrine is boundless in practice because it 
is groundless in principle. Yet it drives our forfeiture law and 
practice today, and this bill leaves it in place. No "nexus" 
refinements will solve the problem. Nor will refinements of the 
"innocent -owner defense" --which effectively deputizes innocent 
people- -offer anything but occasional relief. This substantive 
foundation of so much of our civil forfeiture law, the handmaiden 
of the personification doctrine, must be torn up, root and branch. 
Only then can we hope to secure the idea that forfeiture, in a free 
society, is not a free-standing doctrine but a very limited element 
in a remedial scheme that is rooted, ideally, in a rational system 
of wrongs to be remedied. 

H.R. 1916 gives limited relief. It does not address the heart 
of the matter. 



362 



ENGLISH & SMITH 

FACSIMILE ATTORNEYS A LAW TtLEI'HON'E 

:03i 54S-S<)35 COURTHOUSE SQUARE .TOii 5-tSS<)l I 

526 KJNG STREET, SUITE 213 
ALEXANDRIA. VIRGINIA 22314-3163 



Septembers, 1996 



Stefan D. Cassella. Esq. 

Deputy Chief 

Asset Forfeiture and Money Laundering Section 

1400 New York Avenue. NW 

W ashineton. DC 20530 



Dear Stef: 



I received your letter of August 26, 1996. Thus far, 1 have not memorialized any of my 
comments or suggestions in writing. I think your most recent letter calls for a written response 
so that there is no misunderstanding about where we stand. This letter has been review ed and 
approved by m> fellow co-chairs, Richard Trobermjm and E.E. ("Bo") Edwards and by 
NACDLs Legislative Director. Leslie Hagin. And thus you can consider it as representing 
NACDL's position even though much of it is written in the first person. 

On page two of your letter, paragraph two, you state that with respect to the remaining 
10 provisions on List B I have "rejected all efforts at compromise." That is not so. 1 made a 
number of suggestions for compromise, some of which you said you would consider. I do not 
see these suggestions reflected in your letter. I will reiterate some of them as I go down the 
various lists. In general, 1 think that 1 have gone much further in the direction of accommodating 
the DOJs wishes than many NACDL members would think desirable. Remember, our 
organization strongly supports the Hyde bill but feels it does not go^ar enough in addressing our 
concerns! I wish the DOJ (not to mention the Treasury) could be as open-minded about 
reconsidering some of its more ill-conceived proposals. Of course, you are not personally to 
blame for the institutional biases that infect the DOJ bill. You are one of the/ew people over 
there who is capable of seeing another point of view. 

Before I turn to List C, let me make some points about List A. The last time we spoke 
1 requested a change in the legislative history you drafted for sections 206 and 215. You did not 
voice any objection to my proposal. However, the change 1 requested is not in the most recent 
draft of the legislative history for sections 206 and 215. 1 proposed that you strike the words "to 
challenge the finding that the property was subject to forfeiture" and substitute "to litigate the 
forfeitability of the property de novo. The evidence developed in the criminal proceeding 

1 



363 



against the defendant could not be considered by the trier of fact in the in rem proceeding under 
§853(t) because the third party did not participate in the criminal proceeding." This change in 
the language of the legislative history is needed because the current language might be read to 
suggest that the third party does not have a right to litigate the forfeitability of the property de 
novo. It is also needed because current §853(n)(5) requires the court to '"consider the relevant 
portions of the record of the criminal case which resulted in the order of forfeiture." It needs to 
be made clear that this provision doesn't apply to an in rem proceeding under §853(t). 

With respect to section 304 (dealing with the forfeiture of proceeds traceable to 
facilitating property in drug cases), I suggested that a narrow exception be written into the statute 
for the unusual situation where the facilitating property is a legitimate business. We both agreed 
that there is considerable unfairness in forfeiting all of the proceeds from a legitimate business 
which the property owner may have worked hard at for many years. I don't see why law 
enforcement should object to a minor exclusion for that special situation. 

My colleagues, Richard Troberman and E.E. ("Bo") Edwards, have raised objections to 
sections 210, 304, 305, and 408, previously on List A. which I believe are well-founded. Thus, 
these sections should be moved to List B or C. 



Section 210 
Right of Third Parties to Contest Forfeiture df Substitute Assets 

The main problem we see with respect to substitute assets based on a proceeds theorj is 
that the government bases its estimate of the amount of proceeds subject to forfeiture on a "gross 
receipts" definition of proceeds, which greatly increases the amount of substitute property 
subject to forfeiture but which may be rejected later by the trial court based on case law holding 
that the defendant is entitled to a reduction for the cost of the goods sold. In addition, the 
government often exaggerates the amount of the defendant's gross receipts based on arbitrar} 
assumptions about the amount of drugs sold over the life of a long conspiracy. If the 
government has evidence that the defendant sold X pounds of marijuana during one week, then 
it is sometimes simply assumed that the defendant was probably selling the same amount of 
marijuana during each week of a five year conspiracy. Calculating the defendant's gross receipts 
based on such extrapolation methods generally results in a great exaggeration of the defendant's 
gross receipts not to mention his actual profits. The government will then assert in the 
indictment that the defendant must forfeit X million dollars as substitute assets. Because the 
defendant did not make nearly as much profit as the government's exaggerated gross receipts 
figure suggests, and because the defendant's profits will usually have been spent on ordinary 
living expenses, he will usually have property worth a small fraction of the staggering sum 
alleged in the indictment. Therefore, the substitute asset allegation in the indictment, whether 
or not well-grounded in law or fact, will effectively freeze all of the defendant's assets in the 
vast majority of cases. 



364 



How is the defendant giing to pay his family's living expenses and his attomc} fees in 
these circumstances? He can't rely on §21 1(a)(2) because that provision applies only to property 
"restrained pre-trial. " It doesn't apply to property that is effectively frozen as a result of the 
mere allegations in the indictment. The non-applicability of §21 1(a)(2) is also a problem with 
respect to substitute assets based on a facilitation theory. Whatever the theop. . defendant has 
no mechanism for challenging the forfeiture allegations in the indictment and no right to seek 
exemption of property needed for attorney fees and living expenses pendente lite. If §210 is 
enacted, no attorney in his right mind would accept any money from such a defendant. And 
what we re talking about here is clean money or property alleged in the indictment to be 
forfeitable solelv as a substitute asset. 



Section 305 
Forfeiture for Alien Smuggling 

We have no objection to permitting forfeiture of the proceeds of alien smuggling so long 
as proceeds is not defined as "gross receipts." We do object to permitting forfeiture of "any 
property , real or personal . . . that is used to facilitate, or is intended to be used to facilitate, the 
commission of a violation of [8 U.S.C. § 1324(a)(1)(A)]." Of course, conveyances used for 
facilitation are already subject to forfeiture under 8 U.S.C. § 1324(b). The question is whether 
the government should also be able to forfeit real estate and other valuable properly, such as a 
business, based on a facilitation theory. We think not. We know based on experience that the 
government would apply these new powers to impose harsh and often wildly disproportionate 
penalties on anyone who allows his property to be used in any manner to "facilitate" the 
smuggling of even a single alien. While the Excessive Fines Clause provides some protection 
against the worst excesses (assuming a property owner has the wherewithal and determination 
to fight the government in court), it will not prevent the run-of-the-mill extremely harsh 
forfeiture. In most cases the criminal forfeiture of alien smuggling proceeds, combined with 
substitute assets, will allow the government to confiscate all of the defendants property 
anvhow. 



Section 408 
Closing of Loophole to Defeat Criminal Forfeiture Through Bankruptcy 

We don't object to the thrust of this provision. Our problem is limited to the vagueness 
of the "in contemplation of a prosecution" language. What exactly does that mean? We are 
afraid the government will argue that whenever the defendant declared bankruptcy prior to an 
indictment, the bankruptcy was "in contemplation of a prosecution." This language might be 
changed to require either 1) that the defendant was formally put on notice via letter from the 
prosecutor that he was likely to be prosecuted or 2) proof by the government that the defendant 
instituted bankruptcy proceedings for the purpose of defeating or interfering with the 



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government's ability to forfeit his property. 

This is an appropriate place to reiterate in writing a crucial caveat Troberman and I made 
earlier: NACDL's non-opposition to the List A provisions depends on the passage of the core 
provisions of the Hyde bill as part of the same legislative package. We also want a provision 
requiring the government to file its civil forfeiture complaint within 90 days of its receipt of the 
administrative claim unless the court extends the time limit for good cause shown. Although 
some of the List A provisions are not all that significant, they collectively constitute an 
important expansion of government forfeiture powers. We cannot agree to that unless forfeiture 
procedures are made more fair and the only way to do that is to pass the Hyde bill provisions or 
some recognizable version of them. 

I will now turn to the List C provisions. 



Section 101 
Time for Filing Claim; Waiver of Cost Bond 

With respect to the cost bond requirement I made two additional suggestions for DOJ 
compromise with the Hyde bill, which you said would be considered. I suggested DOJ might 
take the position that the maximum amount of the cost bond could be substantially reduced, 
which I believe would be more than adequate to deter frivolous claims, as the DOJ asserts is 
necessary; and second, that a trial judge be given discretion to return the cost bond to a claimant 
who loses the forfeiture case provided that the judge determines that the claimant's litigation 
position was not frivolous. If the purpose of the cost bond is to deter frivolous claims, then a 
claimant who asserts a non-frivolous position in litigation should not be compelled to pay the 
government's storage and litigation costs. You did not express objections to either of those 
suggestions of mine, and you said you would run them by your people. I have yet to hear back 
from you on the subject. 

But I have now also had the opportunity to run this idea by my co-chairs of the NACDL 
Forfeiture Abuse Task Force, and the NACDL legislative director and leadership. This is an 
issue on which NACDL cannot backtrack. We have long strongly supported this proposal to 
abolish the cost bond requirement. And, still seeing no reason to deviate from that position, we 
continue to stand behind the Hyde bill provision. The cost bond requirement serves the 
supposed purpose of deterring frivolous claims. Rather, it simply assumes that only the poorer 
citizen (or indeed, the strapped middle class one) files frivolous claims, and suggests at least that 
one who can "afford" it can still jerk the over-burdened federal courts around, and file frivolous 
claims. This is at least an oddw&y to go about deterring frivolity in the courts. Even if the cost 
bond requirement did deter some frivolous claims, we think it clearly deters a much greater 
number of non-frivolous claims by those unfortunate enough to have been "priced out" of justice 
by the cost bond requirement - economically barred from their supposed right of equal access 



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to justi e. 

In short, the cost bond requirement must be abolished, as Chairman H>de has proposed 
in H.R. 1916. NACDL remains unconvinced that there should be a "poll tax" for justice in 
America. We remain convinced that Chairman Hyde's proposed abolition of this anomalous, 
anti-democratic, "justice ia.\" is a critically important reform to the law of asset forfeiture As 
vou know, the courts have ample powers (e.g.. Rule 1 1), and every incentive -- given their 
notorious case (over)loads - to boot out frivolous claims, be they filed by the poor or the rich. 

I have no objection to a provision requiring the claimant to state "the nature and extent 
of his ownership interest" in the property . However, for the reasons I previously explained, we 
stronelv object to a requirement that the claimant also state "how and when it was acquired." 
The how and uhen requirement would be onerous in many cases and we see no justification for 
it. The claimant ma\ , of course, be required to explain how and when he acquired the property 
once litigation commences in the district court. The government frequently files form 
interrosatories together with the complaint in order to determine whether the claimant has 
standing to contest the forfeiture. We see no reason why a claimant should have to explain how 
and when he acquired each piece of property the government has seized at a \cry early stage in 
the proceeding, when he often hasn't even obtained the assistance of counsel yet. There are 
many cases where the government seizes literally everything a claimant owns, including many 
items of relatively small Nalue. It would be exiraordinarily difficult, if not impossible, for the 
claimant to quickly and accurately provide details as to how and when he acquired each piece 
of property. 

In your lener you provide an example of the kind of information a claimant would be 
required to tell the government under the provision. However, you do not give an> information 
as to "how and when" the h>pothetical owner of the money acquired it. The mere statement that 
the money represents the operating capital of his business does not tell us how and when he 
acquired it. 



Section 105 
Preservation of Arrested Real Property 

We have no objection to a statutory' provision which merely codifies the Supreme Court's 
decision in United States v. James Daniel Good Real Propert\' . 510 U.S. 43 (1993). However, 
we believe that the DOJ proposal does more than that. The videotaping of the interior of an 
occupied home is a very significant invasion of the privacy interests of the homeowner. As 
such, it interferes with the owner's use and enjoyment of the property. After all, one reason 
people choose to live in private dwellings is to protect the privacy of their possessions and 
lifestyle. Videotaping the interior of a home and all of its contents is the functional equivalent 
of a search. We believe that either a search warrant or an order issued after an adversary hearing 



367 



pursuant to Good would be required in order to authorize such videotaping. Apart from the 
constitutional issue involved, we also do not understand wh> law enforcement feels there is such 
a need to videotape. Normally, the government does not seek forfeiture of the homeowner's 
personal property contained within the home. In those cases, we see no justification for 
videotaping the entire contents of the home. In some cases, the government ma\ have an interest 
in videotaping valuable fixtures such as an expensive chandelier hanging in the dining room. 
Those concerns can be dealt with in a far less intrusive manner than videotaping the entire 
contents of the house. Such videotaping will often merely be an excuse for rummaging through 
the homeowner's possessions in search of incriminating evidence. 



Section 107 
Prejudgment Interest 

We see no reason why the government should not have to disgorge any benefit it receives 
from using the claimant's money when it loses the case. We would fully codify the decision in 
United States v. S277.000.00 U.S. Currency . 69 F.3d 1491 (9th Cir. 1995). That decision does 
not expose the government to "unlimited liability based on uncertain calculations of what the 
government could have earned by investing the claimant's money," as you claim in your letter. 
The decision merely requires the government to pay prejudgment interest based on the then 
current Treasury borrowing rate. This is readily calculable and will merely deprive the 
government of the pecuniary benefit it has received by detaining the property owner's money. 
As the Ninth Circuit pointed out, the govenunent derives a greater economic benefit from cash 
held by the Treasury than cash deposited into commercial banks at below Treasury interest rates 
because the cash deposited reduces the government's borrowing needs, which is the equivalent 
of earning interest. 69 F.3d at 1494-96. The DOJ has said the same thing for years. I remember 
going through that drill when I was deputy chief of the Asset Forfeiture Office. The 
government's proposal is designed to allow the govenunent to continue to derive an unjustified 
benefit from the wrongful seizure of a citizen's money. Shame! 



Section 121 
Trial Procedure for Civil Forfeiture 

We have no objection in principal to the codification of case law governing civil 
forfeiture procedures. However, we would like to study your codification more closely before 
signing off on that part of section 121. 

United States v. Urserv . 116 S.Ct. 2135 (1996) does not deal with the problem of 
successive criminal and civil forfeiture actions, but rather with the separate question of 
successive criminal prosecutions and civil forfeiture actions. Of course, Urserv merely held that 
the Double Jeopardy Clause is not implicated by such successive actions. It does not prevent 



368 



Congress from enacting measures to ensure that the government does not o\erreach. Congress 
did just that in 18 U.S.C. §924(d), which was amended following the Sup. erne Court's double 
jeopardy decision in the 89 Firearms case in 1984. Section 924(d)(1) prohibits the government 
from bringing or continuing a civil forfeiture action against weapons follow ing an acquittal of 
the gun o\sner. I uould extend the same type of protection to all civil forfeiture actions, not just 
those involving guns. Other forms of property should have at least as much protection as guns. 
Congress should also require the government to elect between criminal and civil forfeiture 
remedies. There is no reason why the government should be able to bring a civil forfeiture 
action after losing a criminal forfeiture action governed by the same burden of proof where both 
actions in\ ol\ e the same factual issues and a jury has already ruled in the property owner's favor 
in the criminal forfeiture action. Indeed, well established principles of collateral estoppel would 
bar the go\ emment from doing that. I would concede your point that if the property' is involved 
in a crime other than the one for which the defendant was convicted, a separate civil forfeiture 
action should not be barred. However, I would use a "same conduct" test here rather than a 
"same offense" test because it is too easy for the government to predicate the forfeiture on a 
slightly different offense than was charged in the criminal forfeiture case. 

On the issue of standing. I would refer you to my previous criticism of section 101. How 
and when a claimant acquired a property interest generally has no bearing on his standing to 
contest the forfeiture. Normally, the evidence would only be relevant on the merits of the 
litigation, for e.xample, on whether or not the property constitutes drug proceeds. Requiring a 
claimant to set forth the "nature and extent of his ownership interest" will allow the judge to 
determine on the face of the pleadings whether or not the claimant has alleged a sufficient 
interest to confer standing. If the claimant is merely an unsecured creditor that should be 
apparent from his description of the nature and extent of his ownership interest. We see no 
reason to require a further showing of how and when the claimant acquired his alleged interest 
at this stage of the proceedings. You suggest that an unscrupulous claimant presently has the 
ability to tailor his standing claims to fit whatever facts are adduced by the government. 
However, even today the claimant is required to state the interest in the property by virtue of 
w hich he claims to have standing. As I noted above, the government presently has the right to 
send interrogatories to the claim£int at the same time the complaint is filed. Supp. Rule C(6) 
requires the claimant to answer the interrogatories served with the complaint at the time he files 
his answer. Therefore, the claimant must submit voluminous information regarding the evidence 
supporting his standing well before he gets to discover any of the government's evidence. 

Although there is not a lot of caselaw on the question of whether standing is an issue 
exclusively for the court. I would cite the following cases to you for the proposition that standing 
is a jury issue where there is a genuine issue of material fact. United States v. DKG Appaloosas. 
Inc. . 630 F. Supp. 1540, 1557-61, 1567-68 (E.D.Tex. 1986), affirmed, 829 F.2d 532 (5th Cir. 
1987). cert, denied. 485 U.S. 976 (1988) (case in which the government was in unusual position 
of attempting to prove that horse ranch was really owned by a Bahamian shell corporation rather 
than by claimant, a convicted drug kingpin; the jury was not convinced); United States v. 



369 



Premises Kn own as 526 Liscomb Dnve. 866 F.2d 213 (6th Cir. 1989): United States v. Contents 
of Account . 847 F. Supp. 329, 333 (S.D.N.Y. 1994) (husband's statement that he and his wife 
share jointly in their property holdings and that he had authority to sign his wife's name and 
make withdrawals or deposits in bank account held in his wife's name raised genuine issue of 
material fact as to his standing to challenge forfeiture of those accounts). As these cases 
illustrate, sometimes the entire case turns on a disputed issue of fact which is determinative of 
standing. That issue of fact must be decided by a jur>' rather than a court. 

NACDL abides by its long-standing support for Chairman Hyde's proposal to correct the 
applicable standard of proof in civil asset forfeiture cases, raising the government's burden to 
clear and convincing proof We think the clear and convincing standard is appropriate given the 
importance of the property interests at stake and especially given the punitive character of most 
civil forfeiture actions. See Department of Law Enforcement v. Real Propert> . 588 So. 2d 957 
(Fla. 1991) (holding that clear and convincing standard is constitutionally required in all civil 
forfeiture cases). Nonetheless, I do not believe that a preponderance standard would be a '"deal 
breaker." It is a significant improvement over mere probable cause. We are more troubled by 
the government's proposal (in §201) to lower the burden of proof in criminal forfeiture cases. 

We do not regard the "substantial connection" requirement as a major concession by the 
government. As you know, there isn't a dimes worth of difference between the cases holding 
that that is presently the government's burden and the cases which do not require a substantial 
connection. The results reached by the courts are the same regardless of which standard is 
applied. That is why we believe that Congress must define, at least in the legislative histor>', 
what it means by a substantial connection. Otherwise, the courts may hold that the slimmest 
possible nexus with a home, such as the use of a telephone on one occasion, constitutes a 
"substantial nexus." 

I am still opposed to the section on affirmative defenses. I do not understand how it 
would protect claimants from any implication that they are required to put on evidence in 
support of an affirmative defense during the government's case in chief I don't know where 
such a requirement could be inferred from. I am still concerned that many claimants will 
unknowingly waive affirmative defenses by failing to plead them. You say that the government 
will make the same waiver argument even if this provision is not enacted because that is what 
Rule 8(b) requires. So be it. But I will not help the government make that argument. 

If the courts are not going to admit or give any weight to unreliable hearsay, then it does 
no harm to the government to insert the word "reliable" in this provision. You concede that no 
one should have to face the loss of his property "at trial" without being able to confront the 
witnesses against him, but your proposal would allow property to be forfeited on a government 
motion for summary judgment based on a CI's alleged statement to an agent. In many ways, that 
is even more unfair than not being confronted with the CI at trial. We see no reason to provide 
absolute protections for the identity of the government CI in pretrial proceedings. The common 

8 



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law Roviaro balancing lest provides more than adequate protection for the go\ emmcni. See 
*10.04[1 1 of mv treatise on the informer's privilege. As you are aware, few civil forfeiture cases 
actually go to trial. Most are decided on motions for summary judgment. Thus, this is a ver\ 
important point. By the way, 1 do not believe that the present probable cause standard affords 
complete anonvmit)' for informants. Most courts would hold that a claimant has a right to 
depose the confidential informant if the informant is a key witness. Your proposal would 
actually be a step backwards. 

1 don't understand your comments with respect to the Fifth Amendment privilege/adverse 
inference issue. 1 don't understand why you think the constitutional issue is limited to a narrow 
category of cases where there is an identity of issues in a civil forfeiture case and a pending 
criminal prosecution. You state that, in the vast majority of cases, there would be no 
constitutional issue under Ba.xter . Why? I still believe this issue is entirely constitutional in 
nature and therefore it is inappropriate for Congress to attempt to legislate in this area. Of 
course. Congress can provide greater protection than the Fifth Amendment requires - but it may 
not provide less. That is what the DOJ proposal would do. 

1 agree that the government should be able to take steps short of seizure to preserve 
propert> subject to civil forfeiture. However, subsection (k) authorizes the judge to take certain 
steps, including physical seizure and the creation of a receivership, which would require a Good 
hearing. It needs to be made clear that if the action the court proposes to take to preserve the 
property would interfere with the owner's enjoyment or use, then there must be notice and an 
opportunity to be heard in accordance with the dictates of the Good decision. The problem with 
the subsection as v^ritten is that it is not limited to restraining orders and the like. Rather, it also 
authorizes far more drastic interferences with a property owner's rights. Even some restraining 
orders could interfere with the owner's use and enjoyment of his property. 

With respect to the release of property to pay criminal defense costs, I believe you 
exaggerate the difficulties inherent in allowing consideration of affirmative defenses at the 
hearing. Evidently the Supreme Court saw no such difficulties when, in the Good case, it held 
that the Constitution requires consideration of affirmative defenses even at a pre-seizure hearing 
in a case involving real property. The government always has the option of trying to work things 
out with the defendant and his attorneys by releasing a reasonable amount of money to pay the 
criminal defense costs. The govermnent's proposal also fails to give sufficient weight to the 
defendant's interest in obtaining the release of attorney fees necessary for the defense of his 
criminal case. Under the DOJ proposal a defendant may have a perfect affirmative defense to 
forfeiture which the court will not hear because the defendant is barred from even raising it at 
the pre-trial hearing. Why should that defendant be deprived of the financial means necessary 
to defend himself against serious criminal charges? NACDL can never agree to that. Again, this 
whole question is a matter of constitutional law and we believe that it is inappropriate for 
Congress to restrict a defendant's Sixth Amendment rights through legislation. 



371 



I belit ve that district judges can be trusted to not make excessiveness determinations until 
they have sufficient facts upon which to base their decision. I am not aware of any courts 
deciding such issues before they are ripe for decision. However, they may well be ripe for 
decision, before the end of a trial. For example, suppose the government seeks forfeiture of an 
expensive vehicle based on an allegation that a single marijuana cigarette was found inside the 
glove compartment of the car. That type of case ought to be subject to dismissal based on an 
excessiveness claim. Why should a defendant be forced to undergo the expense and 
inconvenience of a trial when the only issue is going to be the excessiveness of the forfeiture? 
I am still not sure exactly what the government's proposed legislation would entail. Would the 
claimant not be able to raise an excessiveness issue in opposition to the government's motion 
for summar)' judgment? If so, how can the government justify that? 

You did not address my concern that the government's proposal would leave forfeitures 
under the customs laws unreformed. That is. the burden of proof in thousands of cases under 
the customs laws would remain on the property owner and the government would only have to 
show probable cause to believe that the property is subject to forfeiture. 19 U.S.C. §1615 would 
remain unchanged. This is not acceptable to NACDL. 

I am glad to hear that you recognize I have raised some legitimate concerns with respect 
to the rebuttable presumptions regarding money laundering. You note that, in discussions with 
the Senate staff earlier this year. DOJ agreed that it would be necessary to tighten up the 
provisions so that the government, for example, would have to establish a factor from each of 
the two categories, to avoid a situation where the government could rely on the presumption in 
virtually any case involving a drug producing countr)' like Colombia or a bank secrecy 
jurisdiction like the Cayman Islands. I am sympathetic to the government's concern about losing 
money laundering cases involving the most sophisticated and dangerous international criminals. 
I believe that some sort of evidentiary' presumption may be justifiable in certain of these cases. 
I would suggest that you take another stab at drafting more reasonable presumptions. I don't 
think it is my role to do that for DOJ and frankly I don't have time to do so. However, I would 
be happy to discuss that with you and respond to your proposals. Nonetheless, I think you have 
exaggerated the risk that the government may someday lose one of these big cases. After all, 
preponderance of the evidence is not so much higher a standard than probable cause. If the 
government can't establish its case by a preponderance of the evidence perhaps it does not 
deserve to win. If and when the government loses such a case, that might be a better time to 
draft evidentiary presumptions to prevent that from happening again. You might then have a 
better understanding of what you really need. 

By the way, my suggestion to simply make it illegal for an American to engage in 
banking transactions in specified bank secrecy jurisdictions was not in jest. Congress ought to 
consider that. 



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Section 123 
Unirorm Innocent Owner Defense 

You have !inle to say about this provision in your letter. You dont respond specifically 
to the concerns NACDL detailed in its June 1996 critique, which is anachment A to our written 
statement of July 22, 1996 before the House Judiciary Committee. We cannot accept this 
provision for all of the reasons stated in that earlier document. We regard it as a big step 
backwards. The limitation of new section 983 to Title 18 civil forfeitures is a glaring deficiency 
in DOJs proposal. I know that the Treasury Department is unwilling to accept any reforms but 
that is not our problem. I guess they will just have to be hit over the head with a nvo-by-four. 
If 1 were Chairman Hyde. I would grill the responsible Treasury officials as to why they believe 
it is unacceptable to provide any protections for innocent owners in civil forfeiture cases under 
the customs laws and in IRS forfeiture cases. I would love to be in the hearing room when they 
try to justify their position. 



Section 124 
Stay of Civil Forfeiture Case 

Your letter does not deal with my criticism of §881(i)(5) which would allow the 
government to make all of its requests for stays ex parte and under seal. This provision would 
efTectively prevent the claimant from challenging or rebutting the prosecutor's arguments in 
favor of the stay. This is obviously unacceptable. Moreover, we object to §881(I)(I) because 
it would make it easier for the government to obtain a stay than at present. Your proposal would 
basicalh require the court to grant the government's request for a stay in every case in which 
the government sought one. There is no justification for that. 

You misunderstand my problem with §881(I)(2), which allows the claimant to seek a 
stay. I am not suggesting that the claimant be permitted to obtain a stay where his Fifth 
Amendment privilege is not implicated. What I am saying is that the claimant's ability to get 
a stay must not depend on whether or not the continuation of the forfeiture proceeding may 
infringe on his right against compulsory self-incrimination. Not because the Fifth Amendment 
isn't implicated, but because the courts have held that forcing the defendant to choose between 
incriminating himself and presenting a defense to the civil forfeiture proceeding does not violate 
the Fifth Amendment privilege. Thus, the language of §881(I)(2) needs to be tweaked. 



Section 131 
Seizure Warrant Requirement 

Your position with respect to proposed §98 1(b)(3) is logical. I don't consider this an 
important point. However, I would still feel more comfortable if, as I suggested before, the 

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legislative history acknowledges the burdens placed on a property owner by defending a case 
in a foreign district and encourages the courts to liberally grant motions for t.ansfer under 28 
U.S.C.§ 1404(a). 



Section 132 
Civil Investigative Demands 

Our 1994 critique of this provision still stands. (The 1994 critique is attachment B to our 
written statement of July 22, 1996 before the House Judiciary Committee.) I am amazed that 
this extraordinary provision was ever considered "non-controversial" by Congress. You state 
that this provision is intended to deal only with the "rare case where grand jury process is 
unavailable because no criminal investigation is contemplated." But 80% of all civil forfeitures 
occur in cases in which there is no criminal conviction. Thus, the use of the provision would 
hardly be limited to the rare case. 

You provide, as an example of the need for this provision, the hypothetical case of a 
deceased leader of a South American drug organization with assets hidden in the United States. 
You note that there is currently no authorit>' to issue subpoenas to compel financial institutions 
or anyone else to provide evidence that would lead to the discovery of those assets so that can 
be forfeited. However, I believe it would be easy to use a grand jury to investigate that very case 
despite the fact that you could not indict the deceased leader of the drug organization. You 
could certainly indict his accomplices and co-conspirators. Hiding drug related assets in the 
American banking system would certainly violate the money laundering statutes. But, let's 
assume for the sake of argument that a grand jury investigation could not be used in these 
circumstances. If the government's real interest is only at getting at bank records, why not 
simply amend 18 U.S.C. §986 to allow for the issuance of subpoenas for bank records prior to 
the commencement of a civil forfeiture action? That would be a far more limited and thus less 
objectionable provision. 

You state that "similar provisions have been part of other civil statutes for decades 
without any indication that any of the horror stories you envision have occurred." I am not 
aware of any other similar provisions that are anywhere near as far reaching as this one would 
be. I am not familiar with the administrative subpoena provision added to the FIRREA Act in 
1989. However, I suspect that it is limited to subpoenas for documentary' evidence unlike 
section 132. It is also obviously limited to bank fraud cases. I would not want to give even the 
most responsible prosecutor the tremendous powers that section 132 would provide him. But 
unfortunately not every prosecutor fits the ideal. I am confident that this provision would be 
abused regularly because there are no restrictions on the prosecutor's power. The government 
has ample means to investigate civil forfeiture cases at present. Other provisions of the DOJ bill 
which we have not objected to would augment the government's investigative powers. For 
example, section 134 would make tax return information available to the government at the 

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invei'igaton stage. Section 133 would provide the government with access to records in bank 
secrec\ jurisdictions; and section 418 would amend the FIRREA Act to permit the use of era. d 
jur\ material by government attorneys in all civil forfeiture cases involving criminal proceeds 
forfeitable under §98 1(a)(1)(C) instead of only those involving certain bank frauds. 



Section 135 
Currency Forreitures 

Your explanation for this provision is refreshingly candid. Although, in theory, the 
burden of proof would remain on the government, in practical effect the burden of proof would 
once again be shifted to the owner of the currency to explain the origin and intended use of the 
mone\ . As you state, "as a practical matter, what this provision does is to ensure that in drug 
courier cases, the claimant has to take the stand to explain the provenance of the currency. He 
cannot relv on a motion to dismiss the forfeiture case for lack of evidence at the close of the 
eovemment's case in chief under Rule 50." That is precisely what is wrong with this provision. 
It blatantly undermines the provision shifting the burden of proof to the government. You are 
correct in predicting that without the presumption, there will be cases where drug couriers sit on 
their hands while courts toss out cases because the suspicious circimistances by themselves don't 
add up to proof by a preponderance. But you cite a case, United States v. $30.060.00 . 39 F.3d 
1039 (9th Cir. 1994), in which the same thing happened under the current probable cause 
standard. As you know, there are many other such cases. Thus, the police would not be 
substantially worse off under the preponderance standard than under the current probable cause 
standard. Indeed, as we noted in our June 1996 critique, which is attachment A to NACDL's 
written statement of July 22, 1996 before the House Judiciary Committee, this rebuttable 
presumption would actually have the effect of lowering the government's burden of proof to 
something below what it is today. This can hardly be labeled progress. The leitmotif running 
through much of your letter is that somehow the government must be ensured against ever losing 
a case. NACDL cannot accept that screwy premise. It's good for the system if the government 
loses occasionally! 

I find it strange that the state police have so much difficulty in accepting a preponderance 
of the evidence standard. After all, virtually every state statute incorporates a preponderance of 
the evidence standard in drug cases and several large states require clear and convincing 
evidence. What is so objectionable about requiring the police to meet the same standard of proof 
in federal forfeiture cases? You also seem to think it remarkable that the police are willing to 
support the enactment of an irmocent owner defense. But, as we point out in our June 1996 
critique, the most significant federal forfeiture statutes already have innocent owner defenses in 
them and they provide for a much broader innocent owner defense than the one proposed in the 
DOJ bill. Thus, the DOJ bill is a big step backwards with respect to the federal statutory 
innocent owner defense. I am reasonably confident that the burden of proof will be changed to 
at least a preponderance standard whether or not the police support it. The police just want to 

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be able to continue to seize any traveler's money on suspicion and call it a forfeiture case. The 
NACDL is certainly not going to encourage that. 



Section 201 
Standard of Proof for Criminal Forfeiture 

Your discussion of this issue is simply not accurate. Libretti v. United States . 1 16 S.Ct. 
356 (1995) did not address the question of what the burden of proof is in a criminal forfeiture 
case. Even though Libretti treated criminal forfeiture as an aspect of sentencing, there is no 
requirement that Congress establish a preponderance standard to govern the jury's verdict under 
Rule 3 1(e) of the Federal Rules of Criminal Procedure. In fact, as is absolutely clear from the 
legislative history of all the criminal forfeiture statutes on the books. Congress plainly intended 
to establish a beyond a reasonable doubt standard. The courts have repeatedly recognized this, 
contrary to your letter. See. e.g.. United States v. Pelullo . 14 F.3d 881, 902-06 (3d Cir. 1994); 
United States v. S8 14.254.76 in U.S. Currency . 51 F.3d 207, 211 (9th Cir. 1995) (criminal 
forfeiture under 18 U.S.C. §982(a) requires proof beyond a reasonable doubt); United States v. 
Prvba . 674 F. Supp. 1518, 1520-21 (E.D.Va. 1987), affirmed, 900 F.2d 748 (4th Cir), cert, 
denied, 498 U.S. 924 (1990) (beyond a reasonable doubt standard applies to RICO forfeitures); 
United States v. Cauble . 706 F.2d 1322, 1347 (5th Cir. 1983), cert, denied, 465 U.S. 1005 (1984) 
(RICO). See also 18 U.S.C. § 1467(c)(1) (requiring the government to meet the beyond-a- 
reasonable-doubt burden for criminal forfeitures in federal obscenity prosecutions); Sullivan v. 
Louisiana . 1 13 S.Ct. 2078, 2081 (1993) ("It is self-evident, we think, that the Fifth Amendment 
requirement of proof beyond a reasonable doubt and the Sixth Amendment requirement of a 
jury verdict are interrelated. . . In other words, the jury verdict required by the Sixth Amendment 
is a jury verdict of guilty beyond a reasonable doubt."). 

In fact, before the government decided that it was in its interest to ignore the clear 
legislative historj', the government conceded that the government's burden of proof under §853 
is also beyond a reasonable doubt. See United States v. Dunn . 802 F.2d 646, 647 (2d Cir. 1986), 
cert, denied, 480 U.S. 93 1 (1987) (agreeing with government's position that burden of proof is 
beyond a reasonable doubt). The Senate report on the 1984 legislation which included §853 
repeatedly demonstrates Congress' understanding that the government's overall burden of proof 
under §853, as well as under the amended RICO forfeiture provisions, would remain beyond a 
reasonable doubt. United States v. Elgersma . 929 F.2d at 1547-48 (discussing legislative 
history). See also H.R.Rep. No. 845, 98th Cong., 2d Sess. 18, 38 (1984) (adopting the Justice 
Department's request for language that criminal forfeiture must be established by proof beyond 
a reasonable doubt). Because, following common law precedent, the Congress decided to 
provide for a juty verdict in criminal forfeiture cases. Congress naturally assumed that that 
verdict would be rendered under a beyond a reasonable doubt standard. I see no reason to 
change the law, but there is a need to clarify Congress' original intent. I was involved in 
drafting the 1984 legislation and am absolutely certain that Congress intended a beyond a 

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reasonable doubt standard in both the RJCO and the §853 statutes. Bui doni take my word for 
it. Look at the legislative histor\' again! Unfortunately, many courts have ignored that 
legislative history in cases under §853 and that is why Congress needs to clarify its intent. 



Section 202 
Non-abatement or Criminal Forfeiture When Defendant Dies Pending Appeal 

The government recently won the Ursery case by relying on an artificial distinction 
between m rem and in personam proceedings. Here the government wants to ignore that 
distinction and treat in personam criminal forfeitures like civil in rem forfeitures for purposes 
of abatement. The government should not be able to have it both ways. 

Your premise that civil forfeitures survive the death of the wTongdoer is also incorrect. 
The federal common law rule is that civil actions for penalties or forfeitures do not surv ive the 
death of a defendant. See paragraph 14.05, page 14-44.4(8) of my treatise for a huge collection 
of cases on this point. In United States v. $47.409.00 in U.S. Currency . 820 F. Supp. 919 (N.D. 
Ohio 1993). an Ohio district judge held that a civil forfeiture under 18 U.S.C. § 1955(d) abates 
upon the death of the wrongdoer. The judge in that case wTote a comprehensive and persuasive 
analysis of the issue in line with my treatise. Thus, there is no anomalous distinction between 
the results in criminal and civil forfeiture cases that needs to be changed by Congress. There are 
simply some erroneous decisions holding that civil forfeitures do not abate because the action 
is against the property. The Supreme Court has repeatedly rejected that fiction in recent years. 

In NACDLs June 1996 critique we offered what is essentially a compromise: provide 
for non-abatement of the criminal forfeiture where it involves proceeds. We said that where the 
forfeiture involves facilitation property it is clearly punitive in nature and no purpose is served 
bv punishing the defendant's innocent heirs. On the other hand, there is no reason to allow them 
to profit from his wrongdoing, so we do not fmd forfeiture of drug proceeds to be illogical in this 
context. 



Sections 205 and 208 
Pretrial Restraint of Substitute Assets/Seizure Warrant Authority 

The Second and Fourth Circuits have held incorrectly that the government presently has 
the authority to restrain substitute assets pretrial. All the subsequent circuit cases have rejected 
that position based on clear legislative history to the contrary and on the plain language of the 
criminal forfeiture statutes. Thus, while section 205 may merely codify the Second and Fourth 
Circuit case law, that is meaningless since those cases are wrongly decided. What you are 
actually asking Congress to do is grant you new authority to restrain substitute assets for 
forfeiture. In our discussions I took the position that the government did not need this new 

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authority. I relied mainly on proposed section 210 of your bill, not section 209. It would amend 
§§ 1963(c) and 853(c) to provide aiat a third party may contest the forfeiture of substitute assets 
if the third party's interest in the property is vested before the property is named in an 
indictment, information or bill of particulars. My argument was that §210 will obviate the need 
to restrain substitute assets because if they are transferred after being named in an indictment, 
information or bill of particulars, the third party will have no interest in them. Section 209 
provides the government with additional authority to recover substitute assets from a third part)' 
transferee. Although NACDL opposes §§209 and 210 for the reasons stated elsewhere, the 
burden is on the government to show why it needs §§205 and 208 in addition to the new 
authority that would be granted to it under §§209 and 210. 

I also suggested that NACDL might be willing to support a more limited pretrial restraint 
provision -- one requiring the government to show that there is reason to believe the defendant 
will improperly transfer his assets without a restraining order. I do not see why that is 
unreasonable. As presently drafted, section 205 would give the government an automatic right 
to a restraining order reaching substitute assets upon indictment. We see no reason to require 
the district court to rubber stamp a request for such a far-reaching restraining order in every case. 
The government should have to demonstrate a need for this extreme measure and the defendant 
should have an opportimity to be heard before the restraining order is issued. 

In NACDL's June 1996 critique we suggested that Congress should enact some sensible 
limitations on the scope of substitute asset forfeiture. We suggested that it should clarify that 
substitute assets may not be forfeited merely because the defendant had spent the tainted assets, 
which is the government's theory in many cases. Substitute asset forfeiture should be available 
only when a defendant or his agent take some action for the purpose of making the tainted 
property unavailable for forfeiture. We also suggested that Congress should provide that the 
defendant's primary homestead, up to a value of $250,000.00, may not be forfeited as a 
substitute asset. This humanitarian limitation would prevent substitute asset forfeiture from 
becoming, in effect, forfeiture of estate, the terrible common law practice that the Framers 
abolished more than 200 years ago. The government has not responded to these suggestions. 

You state that prosecutors have exercised restraint in not attempting to seize substitute 
assets under §853(f)- However, that is not surprising since it is clear that §853(0 does not 
authorize the seizure of substitute assets. If assets are not subject to pretrial restraint, then it 
logically follows they are not subject to pretrial seizure. 

In NACDL's June 1996 critique we noted that proposed section 21 1(a)(2), which deals 
with exemptions from restraining orders, merely gives the district court discretion to exempt 
money needed to pay attorney fees and other necessary living expenses. We suggested that the 
word "may" be changed to "shall" so as to provide more assurance that the provision's salutary 
purposes will actually be achieved. 



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§853(0 currently authorizes seizure of even tainted assets onh on a shouing b> the 
government that less drastic measures such as a restraining order are likely to be ineffective in 
protecting the government's interests. We see no reason to alter that provision to require judges 
to issue seizure warrants in every case. That would be the effect of amending 2 1 U.S.C. §853(0 
to conform the procedure for issuing a seizure warrant to the procedure in civil forfeiture cases. 
Criminal forfeiture cases are fundamentally different in that the court's jurisdiction does not 
depend upon a prior seizure of the property. 



Section 209 
Forfeitable Property Transferred to Third Parties 

The NACDL believes that the Supreme Court decided Caplan & Drvsdale v. United 
States . 491 U.S. 617 (1989) wrongly. We are not going to encourage Congress to enact 
legislation that makes it easier to forfeit attomey fees, particularly attomey fees that have already 
been fully earned. If this provision was limited to sham transactions, we could support it. 
However, as in the Moffitt. Zwerling case, this provision would hurt honest defense attomeys 
who have simply made a mistake in accepting a fee that they had reasonable cause to believe 
might be tainted. It is bad enough for the government to take the fee away before it has been 
spent: it is quite another thing for the government to be able to sue the defense attorneys and 
collect a judgment for the amount of the fees long after they have been spent. This will often 
entail substantial hardship for the attomeys as in the Moffitt. Zwerling case. In that very case, 
had the government acted sooner to put the defense attomeys on notice that it considered their 
fee to be subject to forfeiture, they could have withdrawn from the case before spending a huge 
amount of time defending it. They also could have segregated the fee m.oney pending litigation 
over its forfeitability. The government won the Moffitt. Zwerling case in the Fourth Circuit and 
we therefore see no need to codify the result in that case. Because the outcome of these cases 
may turn to some degree on equitable considerations, it is probably best to leave the matter to 
the courts. 



Section 211 
Hearings on Pretrial Restraining Orders; Assets Needed to Pay Attorneys' Fees 

I am pleased to see that you are willing to discuss alternatives to this section. We would 
be happy to do this. I believe that this is one provision where compromise could be reached. 
But I doubt that it can be done in time for enactment in this session of Congress. I understand 
the government's objection to allowing the court to look behind the grand jury indictment to 
review whether there is probable cause to support the underlying criminal charge. That is clearly 
subject to abuse for discovery purposes. Nonetheless, that is what the Second Circuit sitting en 
banc in United States v. Mon.santo. 924 F.2d 1 1 86 (2d Cir.), cert, denied, 1 12 S.Ct. 382 ( 1991 ), 
said was constitutionally required. Only one judge on the Second Circuit dissented. 1 am not 

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aware of ai-'v authority to the contrary decided after Monsanto . Thus, here is another area where 
you are asking the defense bar to alter existing law to our detriment. And again, you are asking 
us to agree to provide less protection than a distinguished court has said is constitutionally 
required. So this presents considerable difficulties, not the least of which is that this is a 
pocketbook issue for defense lawyers. If the government expects significant defense bar 
concessions here, it should be prepared to offer important concessions elsewhere in the bill. So 
far I do not see any readiness on the part of the government to do so. 



Section 213 
Appeals in Criminal Forfeiture Cases 

This dispute also does not turn on whether Libretti was correctly de-cided. Libretti says 
nothing about whether or when the government may appeal an adverse decision regarding 
criminal forfeiture. I find this propo.sal to be one of the most offensive ones in the package in 
that it demonstrates the government's lack of respect for jur)' verdicts. Again. DOJ apparently 
believes it ought to win every case it brings and if the jury disagrees, then to hell with them. 
Even in a civil forfeiture case the Seventh Amendment prevents the government from asking a 
federal appellate court to reexamine the facts found by the jury. See Gasparini v. Center for 
Humanities. Inc. . 1 16 S.Ct. 22 II (1996). In particular, take a look at Justice Scalia's wonderful 
dissent in that case, joined by your friends Justice Thomas and Chief Justice Rehnquist. If a 
federal appellate tribunal may not constitutionally reexamine a civil jury verdict, why in the 
world should a criminal verdict under Rule 31(e) be subject to review by an appellate court? In 
the handful of states where juries are entrusted with non-capital sentencing responsibilities, the 
state may not appeal the jury's sentence. Why is this any different? We have no objection to 
authorizing government appeals from post-verdict decisions of a district judge denying 
forfeiture. Such a right of appeal would parallel the government's right to appeal the grant of 
a Rule 29(c) motion for judgment of acquittal. 



Section 301/302 
Forfeiture of Proceeds of Federal Crimes/Uniform Definition of Proceeds 

As set forth in our June 1996 critique, NACDL will not support any expansion of 
proceeds forfeiture unless proceeds is defined as profits, not gross receipts. We are not saying 
that a criminal should be given credit for his overhead. The caselaw distinguishes between 
overhead expenses and the cost of the goods sold. We are merely allowing the defendant to 
show what the cost of the goods sold are, whether those goods are widgets or marijuana. The 
fact that so many cases have interpreted the ambiguous word "proceeds" to mean net profits 
should suggest to the government that the forfeiture of gross receipts is often too harsh. As we 
noted in our June 1996 critique, the unfairness of forfeiting gross receipts is greatly aggravated 
by the substitute asset provisions and the judicially developed concept of joint and several 

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liabilitv. Each defendant in a criminal venture or conspiracy becomes joinil\ andsc\erall> liable 
for the entire amount of the gross proceeds received by all participants in the criminal venture ~ 
usuallv a staggering sum that allows the government to wipe out the assets of ever> detendant. 



The best example of the untoward results that would follow from adopting the 
government's definition of proceeds arises in cases under 18 U.S.C. §1014. If a person makes 
a single false statement on a bank loan application the government may forfeit the entire amount 
of the loan proceeds he obtained from the bank. Everybody knows that it is e.xtremeK common 
for borrowers to make false statements on bank loan applications. These false statements are 
often immaterial and the bank may not lose a penny. Nonetheless, whenever the government 
sees fit to do so, it may destroy the borrower's life by prosecuting him for a §1014 offense and 
forfeiting the entire amount of the bank loan. Usually the bank loan is for the purpose of 
purchasing a home. If the defendant isn't rich, he loses his home. This is an outrageous 
provision and Congress ought to amend §§981 and 982 to exclude false bank loan applications 
from their ambit. I have found that the government uses §1014 forfeitures extremely selectively 
to "get " defendants or third parties whom it doesn't like for other reasons having nothing to do 
with the merits of the §1014 case. Most of the time the bank has not lost a dime, but the 
government seeks a huge forfeiture anyway. 

If Congress does enact a broad provision authorizing forfeiture of proceeds for all Title 
1 8 felonies, then it should seriously consider restricting the Money Laundering Act to offenses 
that actually involve money laundering and not include mere receipt and deposit offenses. If 
there is any justification for the extraordinary breadth of 18 U.S.C. §§1956 and 1957, it lies in 
the fact that forfeiture cannot be accomplished for the predicate crimes themselves. Once it is 
possible to forfeit the proceeds of all Title 18 felonies without charging money laundering, 
§§1956 and 1957 should be trimmed back substantially. 



Section 308 
Forfeiture for Violations of §60501 

The NACDL is certainly not going to support this provision. As you know, our 
organization has been fighting for many years to get Congress to modify §60501 so that defense 
attorneys can comply with their ethical obligations and at the same time comply with the law, 
which in many states is not possible at present. See, e.g., United States v. Monnat . 853 F.Supp. 
1301, 1303 (b. Kan. 1994); Tarlow, "IRS Currency Reporting -- Form 8300 Revisited," The 
Champion, July 1996, at 42. We have had no success with Congress and we have also had no 
success with the IRS and the DOJ in trying to get them to treat attorneys differently than car 
dealers and jewelry merchants. Lenin once said that the capitalists would try to sell the ropes 
that the Communists would use to hang them. We, as an organization, have no intention of 
providing you with the ropes to hang us. 

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The more serious violations of §60501 also involve violations of 18 U.S.C. §§1956 and 
1957. Therefore, in the more serious cases, the government ma> forfeit the unreported cash 
under §§98 1 and 982. We see no reason to provide the government with the same harsh remedy 
for §60501 violations that do not amount to money laundering. It ought to be enough that the 
merchant or attorney can be convicted of a felony offense merely for failing to file IRS Form 
8300. You neglect to mention that merchants and others who fail to file Form 8300 are also 
subject to heavy civil money penalties by the IRS. Indeed, even if one files the form but refuses 
to complete certain portions of the form because one desires to protect one's client's 
confidences, the IRS can and does levy heavy civil penalties against the defense attorney and 
those penalties must be paid in full before the attorney has the right to challenge the penalt)' 
assessment in court. Civil penalties under 26 U.S.C. §672 1(e) for intentional non-disclosure of 
information equal the greater of $25,000 or the amount of the cash recei\ed in a transaction, up 
to $100,000. This is outrageous and should be changed. Ver>' few attorneys have the 
wherewithal to pay these heavy civil penalties and therefore must immediately knuckle under 
to the IRS" demands. It is hardly necessar\- to threaten the attorney with forfeiture of his fee in 
addition to these onerous civil penalties. In any event, IRS takes the position that non- 
compliance w ith §60501 makes the proceeds of the transaction forfeitable under 26 U.S.C. 
§7203. 



Section 403 
Minor and Technical Amendments Relating to 1992 Forfeiture Amendments 

I opposed §984 because I regarded it as a case of the camel s nose getting under the tent. 
The govenmient's current proposals prove me right. Having gonen its nose under the tent the 
government now wishes to extend the dubious principal of substitute asset forfeiture in civil 
forfeiture cases across the board. I would never agree to this. I believe substitute asset forfeiture 
should be restricted, not expanded. I believe there is a good chance that the Supreme Court will 
someday hold substitute asset forfeiture unconstitutional on Eighth Amendment grounds because 
there is absolutely no nexus between a substitute asset and the predicate offense. Substitute asset 
forfeiture seems to run afoul of the Excessive Fines Clause. 

As the legislative history of §984 explains, the purpose of the one year limitations period 
was to provide a factual basis for believing that the substitute funds were also likely to be 
tainted. The government is ignoring that rationale in arguing for a much longer limitations 
period. Currently, the forfeiture suit must be filed within a year of the offense that is the basis 
for the forfeiture. The DOJ proposal would merely require a seizure within two years of the 
offense. That change completely undercuts the rationale of §984. 



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3 9999 05984 056 9 



Section 409 
Statute of Limitations for Civil Forfeiture 

Your "compromise" proposal is another example of the government wanting to have its 
cake and eat it too. I cannot see why three years is not enough time for the government to 
commence a forfeiture action after it discovers the involvement of the property in the offense. 
That change would still give the government the benefit of a much longer limitations period than 
it presently enjoys in many cases. For example, if the involvement of the property was only 
discovered 10 years after the offense was committed, the government would have three 
additional years (a total of 13 years after the offense was committed) in which to bring a 
forfeiture action. At present, §1621 would begin to run from the date of the discovery of the 
offense and w ould bar the forfeiture of the property. Our willingness to let the limitations period 
run from the time the involvement of the property in the offense is discovered is a very 
substantial concession to the government. 



Section 416 
Fugitive Disentitlement 

Your reading of the Supreme Court's decision in Degen v. United States . 1 16 S.Ct. 1777 
(1996). is seriously flawed. I do not see one word in the opinion which can be read as inviting 
Congress to codify the application of the disentitlement doctrine in the civil forfeiture context. 
True, the court did hold that judges lack the authority to create so sweeping a sanction on their 
own. However, the court made clear its disapproval of the way the disentitlement doctrine has 
been applied in civil forfeiture cases and that disapproval does not rest mainly on the judges' 
lack of authority. It rests rather on considerations of fundamental fairness. The Degen court did 
not have to decide whether disentitlement of a fugitive forfeiture claimant would violate due 
process, but it suggested that the due process issue was a serious one. The Seventh Circuit has 
held that application of the disentitlement doctrine in this context is a due process violation, 
relying on the same line of old Supreme Court cases discussed in Degen. See United States v. 
■i;40.R77.59 in U.S. Currency . 32 F.3d 1151 (7th Cir. 1994). I fuid the Seventh Circuit's 
constitutional analysis compelling and I believe the Supreme Court will decide the issue the 
same way if Congress is foolish enough to enact DOJ's proposal. 

I believe that our exchange of views has been useful and illuminating. I hope that it helps 
the government to see our point of view more clearly than it did previously. I think we have 
identified the areas where we can find common ground and those where we cannot. 
Unfortunately, the latter area is a very broad one. We would be happy to continue these 



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discussions at your convenience. 



Sincerely, 

David B. Smith 

Co-Chair, NACDL Forfeiture Abuse Task Force, 
on behalf of the NACDL Forfeiture Abuse Task 
Force and NACDL 

o 



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ISBN 0-16-053850-5 




9 780160"538506 



90000